Opec+ likely to keep oil production levels amid sanctions against Russia

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Opec+ likely to keep oil production levels amid sanctions against Russia

The big oil producers, led by Saudi Arabia and Russia, are expected to maintain current production levels at a meeting on Sunday before new sanctions against Moscow take effect.

The 13-nation Organization of the Petroleum Exporting Countries (OPEC) will consider its October decision to cut production by 2 million barrels per day in talks with 10 other oil producers, including Russia. The OPEC+ video conference will be held on Sunday at 11:00 GMT.

On Friday, the EU, G7 and Australia agreed to cap the price of Russian oil at $60 a barrel, effective Monday or shortly thereafter, along with an EU embargo on seaborne shipments of Russian crude.

It would prevent the seaborne shipment of Russian crude oil to the European Union, which accounts for two-thirds of the bloc’s oil imports from Russia, and seek to siphon billions of euros from Moscow’s military coffers. Russia on Saturday condemned the new price cap and threatened to suspend supplies to countries that introduced the measure, while Ukraine suggested the cap should have been lower.

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For OPEC+, the big unknown in the oil equation is how much sanctions will hurt Russian supplies.

“Uncertainty over Russian supplies is significant,” DNB analysts said. Therefore, OPEC will “seek a discreet meeting that does not change existing production quotas.”

uncomfortable position

OANDA analyst Craig Earlam said Moscow’s threat to cut supplies to countries that adhere to the price cap “will put some countries in a very uncomfortable position.” .
“Choose between losing access to cheap Russian oil or facing G7 sanctions”. UniCredit analyst Edward Moya said the choice of a virtual OPEC+ meeting rather than a face-to-face meeting at Vienna headquarters marks an extension of policy. However, the possibility of a “significant reduction in oil production” cannot be denied at this point.

Two global oil benchmarks are off from their March highs near year-to-year lows as the economy is weighed down by rising inflation and fears of reduced energy demand from China due to coronavirus-related restrictions. remained far away.

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Since the group’s last meeting in early October, Brent North Sea Oil and its U.S. equivalent WTI have fallen more than 6% in value.

However, speculation that another of his OPEC+ production cuts may still be under consideration has pushed prices higher throughout the week. “OPEC+ may feel compelled to take a more aggressive stance,” said UniCredit analyst Edoardo Campanella, who could cut more or threaten to cut more. said there is.

“Russia could also use its influence within OPEC+ to retaliate by forcing further production cuts in the future, thereby deepening the global energy crisis,” he added.

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