OPEC won’t boost output amidst Russia’s threats to cut oil production

(Bloomberg) – Russia’s partners in the OPEC+ oil coalition signaled they won’t boost oil production to fill in for cutbacks announced by Moscow.

The OPEC+ group, led by Saudi Arabia, will maintain output despite plans by the Kremlin to cut 500,000 bpd in retaliation for international sanctions, according to delegates who declined to be identified.

Oil jumped after Russia’s announcement, with Brent rising 2.8% to $86.90 a bbl. It later pared gains to 1.4%, or around $85.65.

Riyadh and others in the producers’ alliance have indicated they aim to stick with targets fixed late last year for the rest of 2023. They believe these will keep global oil markets broadly in balance.

“We really believe OPEC+ will hold production flat for the full year,” Amrita Sen, co-founder of consultancy Energy Aspects, said to Bloomberg TV on Friday, after visiting Saudi Arabia. “Having spoken to quite a few officials in Riyadh, the motto was very much to stay put this year — no changes to OPEC+ policy, regardless of the volatility we see in prices.”

While the U.S. and other consumers repeatedly urged OPEC to fill in any gap left by Russia, the group has been unmoved, remaining concerned that increasing supplies could oversupply the market and endanger oil revenues for its members.

“I doubt Russia’s OPEC+ partners were taken by surprise and do not expect the supply reduction will alter their ‘stay put’ policy stance,” said Bob McNally, president of Rapidan Energy Group and a former White House official.

OPEC officials have indicated they’re still apprehensive that the resurgence in Covid cases in China could derail the country’s economic recovery as it reopens. Secretary-General Haitham Al-Ghais said this week the disease is a “beast” menacing the global economy.

Saudi Energy Minister Prince Abdulaziz bin Salman said last week in Riyadh that the bar for any intervention will be very high. “I will believe it when I see it and then take action,” he said.