OPEC+ likely to keep production levels

Members of OPEC+ were expected to stick with their planned oil output targets after they met on Sunday, as the high-stakes global energy poker game continues with no sign of either side flinching.

OPEC+ consists of the 13 members of the Organization of the Petroleum Exporting Countries, which includes Iran, Iraq and Saudi Arabia, and other major crude oil producing countries, including Russia, Malaysia and Bahrain. Together, bloc members account for 40 percent of global crude oil production.

In October, they agreed to reduce production by 2 million barrels a day, which is around 2 percent of world demand, from November until the end of next year.

This was justified, the group said, by a less promising global economic outlook and factors such as higher interest rates and slower growth in key markets.

However, the move angered Western nations led by the United States, which has accused the group and one of its key players, Saudi Arabia, of effectively siding with Russia in the conflict in Ukraine, which continues to cause major disruption to global energy supplies and prices.

“There’s going to be some consequences for what they’ve done with Russia,” US President Joe Biden said of Saudi Arabia in a CNN interview at the time. “I’m not going to get into what I’d consider and what I have in mind. But there will be — there will be consequences.”

On Friday, in an attempt to apply economic pressure to Russia, the G7 nations and Australia agreed to a price cap of $60 per barrel on Russian seaborne crude oil to cut off revenue, but to keep supplies going.

This comes in addition to a boycott of Russian seaborne oil imports by the European Union that was announced in the summer.

Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington, told the broadcaster NPR that a price cap rather than a limitation on output was an untried economic tactic.

“What policymakers are trying to do is cut the world’s largest oil exporter out of the market to a large degree,” he said. “They’re trying to cut Russia off from Europe, which has always been one of its largest export destinations.”

‘Safest path’

Ahead of the meeting, The Wall Street Journal reported there were signs that OPEC delegates were “leaning toward the safest path, keeping output the same”, a policy known as rollover, while the impact of the price cap and EU boycott became apparent.

“The path of least resistance seems to be a rollover until you have more clarity,” Helima Croft, chief commodities strategist at Canadian broker RBC, said.

On Saturday, it was reported that OPEC members had a virtual meeting ahead of the wider group discussion, and the Russian price cap question was not even mentioned.

Russia has denounced the $60 price cap on its oil agreed by the EU, G7 and Australia.

“We will not accept this price cap,” Kremlin spokesman Dmitry Peskov told domestic news agencies on Saturday. He added that Russia, the world’s second-largest crude exporter, was “analyzing” the move.

The cap will come into effect on Monday or soon after, alongside an EU embargo on maritime deliveries of Russian crude oil.

The embargo will prevent seaborne shipments of Russian crude to the EU, which account for twothirds of the bloc’s oil imports from Russia.

In a separate development, Russian Defense Minister Sergey Shoigu held talks with his Belarusian counterpart Viktor Khrenin, the state-run Belta news agency reported on Saturday.

The two sides discussed bilateral military cooperation and amended an agreement on the “joint provision of regional security”, it said.