OPEC mulls response as EU caps Russian oil price
Oil production cut may help Moscow dodge the EU embargo.
LONDON, United Kingdom (AFP) — Major oil producers are expected to stick to their current output strategy or even slash production further when they meet on Sunday in the face of falling prices, a Russian oil price cap and an embargo on Russian crude shipments.
At their last ministerial session in October the 13-nation Organization of the Petroleum Exporting Countries headed by Riyadh and its 10 allies led by Moscow, collectively known as OPEC+, agreed to reduce output by two million barrels per day (bpd) from November.
The OPEC+ reduction amounted to the biggest cut since the height of the Covid pandemic in 2020.
Amid fears of economic slowdown, Sunday’s cartel meeting via videoconference convenes ahead of the European Union enforcing an embargo on Russian crude shipments from Monday.
The embargo will prevent shipments of Russian crude by tanker vessel to the EU, which account for two thirds of imports, potentially depriving Russia’s war chest of billions of euros.
The G7 and EU on Friday agreed to a $60-per-barrel price cap on Russian oil in an attempt to deny the Kremlin of war resources, as Russian President Vladimir Putin said more strikes on Ukrainian infrastructure were “inevitable.”
Since the October meeting, oil prices have been plummeting to their level of early 2022, far from the peaks above $130 a barrel in March after the start of Russia’s invasion of Ukraine.
Two global crude benchmarks were hovering around $85 a barrel on Thursday.
Last week, Putin had warned that any attempt by the West to cap the price of Russian oil would have “grave consequences” for world markets.
Russia “has several options to circumvent such a cap,” UniCredit economist Edoardo Campanella said, adding that “OPEC+ might feel compelled to adopt a more aggressive stance” by cutting or threatening to cut production even further.
“Russia might also retaliate by leveraging its influence within OPEC+ to push for more production cuts down the road, thus exacerbating the global energy crisis,” Campanella said.