OPEC to wait for calmer financial markets before making oil production cut decision

Paul Wallace and Salma El Wardany, Bloomberg March 16, 2023

(Bloomberg) — OPEC+ will likely wait for financial markets to calm before deciding whether it needs to react to oil’s rout by cutting production, according to consultancy Energy Aspects Ltd.

“It would be premature for OPEC+ to take action without first understanding what the risks are,” EA analysts, including co-founder Amrita Sen, said in a note to clients. The U.S. Federal Reserve and European Central Bank “need to address market conditions before OPEC+ makes any moves.”

Global markets were roiled on Wednesday as turmoil at Credit Suisse Group AG triggered panic among banking investors. The crisis spread to commodities, with oil falling to a 15-month low. Brent crude is down 10% this week, trading at less than $75 a barrel, though it pared losses early on Thursday after Swiss monetary authorities offered support to Credit Suisse.

The selloff led energy analysts to question whether OPEC+ — an alliance led by Saudi Arabia and Russia and which controls around half the world’s oil production — would decide to lower output.

“OPEC sources note crude demand remains extremely robust and is at odds with the commodity’s selloff,” EA said. “The last thing OPEC+ wants is to even mention a possibility of production cuts out of concerns that the market will misconstrue these comments as fear of demand weakness.”

The group’s monitoring committee — which can recommend a change in output — is scheduled to meet next on April 3. There’s been no decision to call an emergency meeting, the EA analysts said.

Saudi state oil giant Aramco said this week that sales in China and India, two of the kingdom’s main markets, are strong and rising. Energy Minister Prince Abdulaziz bin Salman has previously said OPEC+ has no intention of raising production this year, but it hasn’t ruled out a cut if it believes demand is weakening.


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