The OPEC+ group currently doesn’t plan to change the course in its oil production targets after Russia announced a cut in its output for March, two delegates from the OPEC+ alliance told Reuters on Friday.
Earlier today, Russian Deputy Prime Minister Alexander Novak said that Russia, a member of OPEC+, would cut its oil production by 500,000 barrels per day (bpd) in March, as a result of the Western sanctions and the price cap on Russian crude oil.
The announcement from Russia sent oil prices up by 2% early on Friday and on course for a significant gain for the week.
“As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the 'price cap',” Novak said, as carried by Reuters. The Russian official added that Russia would “voluntarily reduce production by 500,000 barrels per day in March.”
According to the Kremlin, Russia discussed its plan to cut production with some members of the OPEC+ alliance, in which Russia is a key member leading the group of non-OPEC producers.
Russia, however, had not formally consulted with OPEC+ on its plans before announcing the decision, a Russian government source has told Reuters.
Last week, OPEC+ kept its production targets unchanged in a widely expected ‘wait-and-see’ approach to supply just ahead of the EU ban on Russian diesel and other petroleum products.
Supply from Russia, demand in China, the state of the economies in the coming months, and the trend in interest rate hikes in the U.S. and other major mature economies will be the key decision drivers for OPEC+ this year. As will be the price of oil on the markets—the group led by Saudi Arabia and Russia is unlikely to leave oil trading below $80 per barrel.
By Tsvetana Paraskova for Oilprice.com
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This could be the reason why OPEC+ didn’t see the need to change its production policies particularly that Russia’s production cut fits extremely well with its policy of supporting a Brent crude price above $80 a barrel.
Western countries may interpret OPEC+ decision as tilting towards Russia and in this respect they are right.
OPEC+ is very aware that the Western price cap against Russian oil exports isn’t only aimed against Russia alone but also at its members. That is why both OPEC+ and Russia are extremely gratified by its failure.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert