Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin discussed OPEC+ cooperation in a Monday phone call, according to various sources, with the focus on maintaining the stability of oil prices ahead of a virtual OPEC+ meeting planned for Wednesday.
Russian oil production has held up in spite of new Western sanctions and price caps, and three OPEC+ delegates have told Reuters that the Wednesday meeting is likely to conclude without any output policy changes.
The Wednesday meeting, which will take place at 1100 GMT, is a meeting of OPEC+ ministers only, otherwise referred to as the Joint Ministerial Monitoring Committee (JMMC). Another meeting of the OPEC+ join technical committee (JTC) originally scheduled for January 31st, has been canceled, Reuters reported.
Chinese demand will be a key feature of Wednesday's virtual meeting.
One delegate source told Reuters last week that changes to the current output policy are unlikely due to the rebound in oil prices so far this year.
Oil prices were trading lower on Monday ahead of the OPEC+ meeting and a Federal Reserve decision on interest rates that is also scheduled for Wednesday.
At 10:19 a.m. EST on Monday, Brent crude was trading down 0.83%, at $85.94 per barrel, while WTI was trading down 0.92% on the day, at $78.95 per barrel.
Last week, Oilprie.com reported that due to uncertainties about Chinese demand and Russian supply in February and March, OPEC+ is widely expected to keep the current production levels, which reduced target output by 2 million barrels per day (bpd) from November onwards. Yet, the actual cut is estimated to have been around 1 million bpd.
In December, OPEC-13's average December production rose by 91,000 bpd, according to the MOMR, to 28.971 million bpd, with nearly all of the gains coming from Nigeria. But December's OPEC-10 production - the members bound by the OPEC+ pact - was still substantially below the production quota, with the group underproducing by more than 800,000 barrels per day.
By Charles Kennedy for Oilprice.com
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Their cooperation since the pandemic in 2020 has enhanced OPEC+’s influence over the global oil market and prices. Their discussions today on the phone ahead of the virtual Ministerial Monitoring Committee (JMMC) meeting on Wednesday 1 February will determine OPEC+s oil strategy for 2023.
While the meeting isn’t likely to change current policies in view of the fact that Russian oil production has held up in spite of new Western sanctions and price caps, the JMMC will try to assess how big the impact of China’s return to the global oil market could be.
OPEC+ is projecting that global oil demand could grow by 2.5 million barrels a day (mbd) from 101.3 mbd in 2022 to 103.8 mbd in 2023 with China accounting for 50% of this increase. China's demand this year is projected to hit 17.1 mbd with its crude imports hitting 13.2 mbd.
This optimistic assessment could prompt OPEC+ to surprise the market and agree to raise its production by 1.0 mbd during this meeting or wait until the next meeting when China's impact will become clearer.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert