OPEC+ leaves production quotas unchanged

  • At its meeting on Sunday, the OPEC+ group decided to leave its production quotas unchanged.
  • The group also announced that their next meeting will be in February and the next in June, marking the end of the monthly meetings.
  • With the EU embargo on Russian crude and the G7 price cap coming into force, OPEC+ probably didn’t want to add to the uncertainty in oil markets.

At its last meeting on Sunday, OPEC+ decided not to change the production quotas for its members.

The group agreed in November to reduce those quotas by a total of 2 million bpd, an effective production cut of 1 million bpd in response to a weaker economic outlook.

The decision drew the ire of the Biden administration, which has repeatedly urged OPEC’s de facto leader, Saudi Arabia, to boost oil production as it struggled to lower retail fuel prices.

Now the decision to keep production capped comes at the same time as the start date of an EU embargo on Russian crude plus a price cap backed by the G7 and Australia.

According to Reuters, while OPEC+ officials said the price cap on Russian oil was not discussed at the meeting, analysts have noted that OPEC has cause for concern over the price cap as it sees it as a weapon that will one day be used against it could become .

“The decision reflects the unpredictability of supply and demand over the coming months,” an ANZ analyst said of the OPEC+ decision, as quoted by Reuters.

Perhaps more importantly, OPEC+ agreed to schedule its next meeting in February and the next in June. Until now, OPEC+ has met every month to coordinate production.

If fewer meetings are held from now on, it would indicate that the current policy will stand: the quota cap was originally intended to remain in place until the end of 2021.

Meanwhile, prices are reacting as expected to the OPEC+ decision, helped by the ongoing easing of Covid restrictions in China. At the time of writing, both Brent crude and West Texas Intermediate are up more than a percentage point from Friday, although both remain well below $90 a barrel.

By Irina Slav for Oilprice.com

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