OPEC Plus Sticks to Production Strategy
The OPEC+ oil alliance is sticking to its current production strategy for the time being. EU sanctions against Russia's oil revenues will apply from tomorrow. The OPEC+ countries have nevertheless confirmed their previous oil production targets. However, an expert committee wants to review the production strategy every two months.
Russia will not export its oil under the price cap, even if it has to cut production, Russian Deputy PM Alexander Novak said. / Picture: © Wikimedia Commons, Government.ru, CC BY 4.0
The major oil-exporting countries are leaving current production levels unchanged. At an online conference, the OPEC+ oil alliance said it had confirmed its decision in October to produce two million barrels (159 liters each) less per day until the end of 2023.
Uncertainties in the market are currently considering, it said. The grouping of 23 countries announced its decision a day before an EU boycott of most Russian oil and a $60-per-barrel price cap on Russian oil agreed by the EU and G7 countries came into effect. Its consequences are likely to include an increase in the price of oil.
The EU and G7 measures are intended to reduce Russia's oil revenues because of its war against Ukraine. At the same time, the price cap is intended to prevent a rise in global oil prices once the embargo takes effect. Russia is also a member of OPEC+.
Russia, of course, does not want to accept the price cap and boycott and is trying to prevent this through OPEC+ and counter the West.
The influence of the cartel, which was expanded in 2016 to include ten non-OPEC countries, remains significant. The alliance has a global market share of about 40 percent.
The Russian Vice Head of Government Alexander Novak reiterated that Russia will not accept the price cap on its oil, as reported by the Russian news agency TASS. Russia threatened countermeasures, viewing the instrument as non-market and will develop a mechanism to prohibit the use of the cap, Novak said, according to TASS. However, Novak said, according to TASS, that Russia is ready to cut back its oil production if countries want to apply the cap.
An OPEC+ technical committee plans to review the cartel's production strategy every two months, it said after the oil alliance conference. Should the market situation require it, ministerial consultations would also be held immediately. The next regular ministerial meeting is scheduled for June 4, 2023, it said.
For the OPEC+ countries, the aim is to keep the oil price as stable as possible. The price is just high enough that demand is not completely choked off. This is because countries derive very important revenues from the oil business, which they use to finance government spending. When the oil price was rather low in the meantime, this caused problems for most of the OPEC+ countries.