OPEC Ministers Recommend Unchanged Oil Production Levels from March

Emmanuel Addeh in Abuja

An Organisation of Petroleum Exporting Countries (OPEC) committee has recommended keeping crude production steady and holding output at levels set late last year.

At that meeting, OPEC and its allies had announced a hefty cutback of two million barrels a day to balance markets amid a fragile global economy, mostly induced by the Russia-Ukraine war and the COVID-19 pandemic in China.

Oil prices have had a rocky start to 2023, with a rally in mid-January fading away by the end of the month. That had prompted OPEC and its allies to remain cautious even as industry voices from Goldman Sachs Group Inc. to Trafigura Group predict price gains later this year.

The status-quo recommendation from the OPEC+ Joint Ministerial Monitoring Committee (JMCC) at its online session on Wednesday was widely anticipated and caused little reaction in crude prices. Brent crude futures were little changed near $86 a barrel, Bloomberg reported.

China’s decision to scrap almost three years of stringent Covid-19 lockdowns has spurred a travel revival in the world’s biggest oil importer. Domestic air journeys jumped by 80 percent as tourists flooded to popular local destinations. Nonetheless sentiment remains fragile, with key indicators showing a muted economic recovery after the country had to contend with a resurgence in virus cases.

OPEC+ is also trying to gauge the impact of sanctions on member-nation Russia. Forecasters expect a plunge in output as a European Union ban on imports of the country’s crude expands next month to encompass refined fuels. However, oil shipments have so far remained surprisingly resilient.

Last week, Equatorial Guinea’s Oil Minister Gabriel Mbaga Obiang Lima, who this year serves as OPEC’s president, said the group had to “be very careful on any decision.”

OPEC Secretary-General Haitham Al-Ghais said last month he remained “cautiously optimistic” on the global economy as China’s rebound is countered by weakening growth elsewhere.

The OPEC+ coalition’s Joint Ministerial Monitoring Committee (JMMC) recommended no changes to the group’s output policy at its meeting.

The JMMC, which is made up of key OPEC+ ministers, is not a decision-making body but it can make recommendations based on its assessment of the oil market and also has the authority to recommend an extraordinary ministerial meeting be held if market conditions warrant. As it stands, OPEC+ is not due to hold a ministerial conference until June.

The JMMC’s recommendation to stay the course on current crude production targets comes against the background of similar supply and demand uncertainties that underpinned the group’s December decision to roll over output quotas, notably the outlook for Russian exports and Chinese consumption.

On the supply side, the EU’s embargo on Russian oil products is due to come into effect on 5 February. Its impact, coupled with the effect of the ban on Russian seaborne crude imports and the G7-led $60/bl price cap on Russian crude sales, remains unclear.

 Russian crude exports have shown resilience in the face of the embargo so far, but a decree from President Vladimir Putin banning Russian producers from selling under the terms of the price cap may weigh on output.

Nigeria has for months been a laggard in terms of meeting its OPEC production quota as the organisation struggled to keep the market balanced.

Although there has been an improvement in oil production recent months, Nigeria has only been able to drill just about 60 per cent of its allocation for multiples of months.

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