OPEC+ Delegates Expect Committee to Recommend Maintaining Current Output Levels

OPEC+ delegates said they expect an advisory committee of ministers to recommend keeping oil production levels unchanged when they meet next week. This is amid a tentative recovery in global demand.

The output levels of Saudi Arabia and its partners will be reviewed on Feb. 1. This is after they agreed to significant cutbacks late last year to keep world crude markets in balance. The delegates from the group said that they expect the panel of ministers to maintain the status quo. They are awaiting clarity on the recovery in consumption in China and the impact of sanctions on Russian supply.

International oil prices have climbed in the past two weeks, nearing $90 a barrel as China abandons almost three years of strict anti-Covid restrictions. However, the path of recovery remains uncertain as the country faces a resurgence of virus cases, prompting the Organization of Petroleum Exporting Countries and its allies to stay conservative.

‍OPEC+ is waiting to see the full impact of European Union sanctions on member-country Russia over its invasion of Ukraine. Measures targeting its crude oil sales took effect in December and restrictions on its trade in refined products will arrive next month, but so far Russian shipments have been surprisingly resilient.

‍"It looks increasingly likely that OPEC+ will keep output levels unchanged even after the scheduled meeting," said Raad Alkadiri, an analyst at consultant Eurasia Group. "Prices have firmed, supply remains tight, and there are significant levels of uncertainty for both supply and demand."

‍If the Joint Ministerial Monitoring Committee decides to keep production levels steady when it meets online next week, it would be in line with signals from top officials in the Organization of Petroleum Exporting Countries.

OPEC Secretary-General Haitham Al-Ghais said earlier this month that he is “cautiously optimistic” on the global economy as the nascent rebound in China is tempered by weakness in advanced economies. Saudi Energy Minister Prince Abdulaziz bin Salman insisted last month that OPEC+ will be “proactive and preemptive” to keep markets in equilibrium.

According to Helima Croft, head of commodity strategy at RBC Capital Markets LLC, all signs point to Saudi Arabia continuing its policy of preemption for the time being, and keeping production constraints in place until there is clear evidence of sufficient demand for additional supply.

According to analysts at Goldman Sachs Group Inc. and Energy Aspects Ltd., OPEC+ will only start to reverse its supply curbs in the second half of the year, when increasing demand will tighten the market. The 23-nation alliance is scheduled to meet at OPEC’s Vienna headquarters in early June to review production levels for the remainder of 2023.