OPEC+ committee to meet amid rising oil prices, uncertainty over global economy
A key OPEC+ monitoring committee meets Oct. 4, as the group faces uncertainty over the global economy and rising prices in the fourth quarter.
Despite expectations of a major supply shortfall up to the end of 2023, the group is so far sticking to a policy that includes major voluntary supply cuts by Saudi Arabia and Russia, co-chairs of the Joint Ministerial Monitoring Committee.
Analysts at S&P Global Commodity Insights do not expect OPEC+ to raise output unless prices are above $100/b for some time.
Voluntary cuts introduced this year have seen prices increase significantly, with Dated Brent approaching $100/b — a level that has prompted intervention in the past.
Platts, part of S&P Global, assessed Dated Brent at $96.325/b on Sept. 29, up 26% since Saudi Energy Minister Prince Abdulaziz bin Salman announced the latest cut June 4.
In addition to quotas agreed across OPEC+, Russia and Saudi Arabi lead a group that has introduced voluntary production cuts up to the end of 2024 of 1.7 million b/d. Additionally, Saudi Arabia and Russia are cutting a further 1 million b/d and 300,000 b/d respectively up to the end of 2023.
“We are still reviewing the situation, and certainly the lack of visibility [on the global economic outlook] is not helping,” one senior OPEC source said.
OPEC officials have so far shown confidence that they are following the right policy.
United Arab Emirates’ energy minister Suhail al-Mazrouei said Oct. 2 that OPEC+ is following the right policy and warned against focusing on short-term oil prices.
Supply, demand uncertainty
OPEC’s latest analysis sees global oil demand outstripping supply by more than 3 million b/d in the fourth quarter of 2023. Other agencies put this figure lower, but also see a significant shortfall by year end.
As the group forms policy up to the end of the year, Chinese demand, the risks of a recession in Europe and stock levels are likely to be key considerations.
Stocks have fallen significantly in recent months as additional supply cuts came into force. The International Energy Agency estimates that global oil inventories fell by 76.3 million barrels, or 2.46 million b/d, to a 13-month low in August.
Another crucial element is Russian output, as the largest non-OPEC producer grapples with Western sanctions as well as rising costs related to its invasion of Ukraine. It recently moved to restrict some exports of oil products, which could affect supply in the coming weeks.
“The Russian diesel export ban adds another element to global supply uncertainty, especially since OECD diesel inventories are low relative to pre-pandemic years,” Clear View Energy partners said in a note.
Analysts expect the move to be temporary, due to seasonal factors including the harvest, as well as limited storage capacity and the potential impact on Russian tax revenues.
Both Saudi Arabia and Russia have said that their voluntary cuts will be reviewed monthly.
Currently, the next full OPEC+ ministerial meeting is scheduled for Nov. 26.
The group is also able to call extraordinary meetings if member countries consider this necessary — a step that they have taken in the past.