OPEC+ will decide whether to stay the course or cut further at the next meeting
The OPEC+ group of 23 oil-producing countries is should renew its current oil policy when it meets on Sunday, which means the group will not deepen production cuts beyond the 2mbbl/day cut it ordered in October, but some prominent market watchers say further cuts are possible given concerns about economic growth and demand.
OPEC+ hopes to assess how the $60/bbl price cap on Russian maritime oil will affect markets after it took effect on Monday, and to get a clearer picture of demand in China, which is struggling to reopen its economy as planned due to a resurgence in COVID-19 cases.
“Given the many uncertainties in the market, [OPEC] is unlikely to implement further measures this Sunday,” said Barbara Lambrecht of Commerzbank.
JP Morgan analysts said OPEC+ would likely maintain the production line while leaving the door open for another 500,000 bpd cut if demand deteriorates further.
The group “it would be better to stay the course“and roll over the existing production policy,” Rystad’s Claudio Galimberto told CNBC.
But Goldman Sachs global commodities chief Jeff Currie sees a “high probability” of a cut to account for continued weak demand from China.
RBC Capital’s Helima Croft sees no expectation of an increased OPEC+ meeting and a “significant chance” of a deeper production cut.
The effects of the oil cuts of 2M barrels/day in October were offset by an increase in Russian production – a member of OPEC+ – to 10.9 million bpd in November, driving the group’s overall reduction to just 361,000 bpd on average, Bloomberg reported.
Brut Nymex of the first month (CL1:COM) for January delivery closed +4.8% for the week at $79.98/bbl while February Brent (CO1:COM) ended +2.2% at $85.57/barrel, with both benchmarks recording three-week losing streaks.
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