LONDON/DUBAI (Dispatches) -- OPEC+ agreed to stick to its oil output targets at a meeting on Sunday, two OPEC+ sources told Reuters, as the oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil on supply.
The decision comes two days after the Group of Seven (G7) nations agreed a price cap on Russian oil.
OPEC+, which comprises the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, angered the United States and other Western nations in October when it agreed to cut output by 2 million barrels per day (bpd), about 2% of world demand, from November until the end of 2023.
Washington accused the group and one of its leaders, Saudi Arabia, of siding with Russia despite Moscow’s war in Ukraine.
OPEC+ argued it had cut output because of a weaker economic outlook. Oil prices have declined since October due to slower Chinese and global growth and higher interest rates, prompting market speculation the group could cut output again.
“It’s a rollover until the end of 2023,” an OPEC+ source said after the group’s key ministers reached a decision.
On Friday, G7 nations and Australia agreed a $60 per barrel price cap on Russian seaborne crude oil in a move to deprive President Vladimir Putin of revenue while keeping Russian oil flowing to global markets.
Moscow said it would not sell its oil under the cap and was analyzing how to respond.
Many analysts and OPEC ministers have said the price cap is confusing and probably inefficient as Moscow has been selling most of its oil to countries like China and India, which have refused to condemn the war in Ukraine.
OPEC met virtually on Saturday without Russia and allies and did not discuss the Russian price cap, sources have said.
“We will sell oil and oil products
to countries that will work with us on market terms, even if we have to reduce production somewhat,” Russia’s Deputy Prime Minister Alexander Novak said after Sunday’s quick meeting via videoconference.
Even though “inflation, the tightening of monetary policies and China’s Covid-19 epidemic” were posing risks to the market, it was still “in a better state than two months ago”, Novak said, according to Russian news agencies.
“We are currently working on mechanisms to prohibit the use of the price cap tool at any level”, Novak added, stating that “such interference” could only cause “further market destabilization and scarcity of energy resources”.
Moscow had repeatedly denounced the incoming oil price cap, threatening to suspend deliveries to any country that adopted the measure.
Moscow’s threat to suspend deliveries to countries abiding by the price cap will put “some in a very uncomfortable position”, said OANDA analyst Craig Erlam, “choosing between losing access to cheap Russian crude or facing G7 sanctions”.
Moving forward, OPEC+ might still feel compelled to adopt “a more aggressive stance” by cutting or threatening to cut production, UniCredit analyst Edoardo Campanella said.
“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,” he added.