OPEC+ Agrees to Keep Current Oil Production Cuts

By Adedapo Adesanya

The 23 oil-producing nations under the aegis of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, on Sunday agreed to stay the course on output policy ahead of a pending ban from the European Union (EU) on Russian crude.

OPEC+ decided to stick to its existing policy of reducing oil production by 2 million barrels per day or about 2 per cent of world demand from November until the end of 2023.

This will come as a surprise as analysts had expected OPEC+ to consider fresh price-supporting production cuts ahead of a possible double blow to Russia’s oil revenues.

Led by Saudi Arabia and Russia, OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the United States for the group to pump more to lower fuel prices and help the global economy.

Meanwhile, the EU is poised to ban all imports of Russian seaborne crude from Monday, while the US and other members of the G-7 will impose a price cap on the oil Russia sells to countries around the world.

EU governments tentatively agreed on Thursday on a $60 a barrel price cap on Russian seaborne oil with an adjustment mechanism to keep the cap at 5 per cent below the market price.

EU countries have wrangled for days over the details of the price cap, which aims to slash Russia’s income from selling oil while preventing a spike in global oil prices after an EU embargo on Russian crude takes effect on December 5.

It will allow countries to continue importing Russian crude oil using Western insurance and maritime services as long as they do not pay more per barrel than the agreed limit.

The Russian government has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.

Ahead of the week, this may boost prices as they have fallen to below $90 a barrel from more than $120 in early June ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.