Global oil prices have jumped by more than 11% since the last OPEC + meeting in early February, to touch their highest levels since 2014, making the major oil producers within the OPEC + alliance in front of a decisive decision tomorrow regarding production levels.
The OPEC+ group, made up of members of the Organization of the Petroleum Exporting Countries and allies led by Russia, will hold its next meeting on Wednesday, as Russia’s attack on Ukraine threatens to disrupt already limited supplies of crude oil.
The meeting has two possible outcomes, maintaining the “status quo” on the scheduled increase in production, or expanding production quotas further. But, you see Archyde.com sources It seems that OPEC+ will follow its current pattern and increase production by 400,000 barrels per day. If this is the case, the market will not see a significant impact, as Russian sanctions are likely to keep eyes on the impact.
Ukraine war and the neutralization of the energy sector
On February 24, Russia launched a large-scale invasion of Ukraine, prompting the United States to announce additional sanctions and restrictions on exports to the country. US and European allies have announced sanctions aimed at restricting Russia’s access to the global financial system.
However, unless the United States and the European Union take a decision to collectively remove Russian banks from the global banking system by banning SWIFT, the international payments network, there will be little impact on oil supplies, as at present the SWIFT ban affects a carefully selected group From Russian banks in an apparent Western attempt to neutralize Russia’s vital energy sector for Europe, which depends on gas imports from Russia to cover regarding a third of its needs.
Therefore, the European Union does not seem willing to impose comprehensive banking sanctions through the SWIFT system, so oil prices – on this basis – may not rise much with the continued flow of Russian crude and gas exports, especially since Russia may dim its face from the Chinese market, and it has begun to do so. Already through new deals.
lack of spare capacity
Oil prices recently reached their highest levels in more than seven years, exceeding $100. This is an especially tempting level for US private producers, who may increase production.
On the other hand, OPEC+ has not been able to meet the current production quotas. Oil production among group members was regarding 700,000 barrels per day lower than the collective production quota of 38.74 million barrels per day in January, according to a S&P Global Platts survey, released in February.
Indeed, OPEC+ needs to address a number of problems. One of the main issues is the lack of spare production capacity in general, as some of the group’s producers are already unable to keep up with their quotas. While OPEC+ has stuck to known monthly production increases, real production levels still lag behind target, reflecting a quota deficit. This deficit is expected to increase further in the next few months due to the lack of investment, the decline in the production of fields, and the dilapidated oil infrastructure of a number of members.
Even Russia, as one of the major powers in OPEC+, is also facing production problems. S&P Global Platts has already indicated that Russia’s spare capacity is at 300,000 barrels per day, with Moscow currently producing regarding 10.8 million barrels per day, but its production is supposed to exceed 11 million barrels according to the OPEC + agreement.
Saudi Arabia and the UAE remain the only ones with additional spare production capacity within the OPEC+ alliance.
And earlier today, Tuesday, the Saudi Cabinet, during its session, affirmed the Kingdom’s keenness on stabilizing oil markets and adhering to the OPEC + agreement.
Russian news agencies reported that Russian President Vladimir Putin discussed with Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed Al Nahyan, in a phone call, the OPEC + oil agreement, and they pledged to continue coordination with regard to global energy markets.
It can be said that the OPEC + alliance faces challenges in the wake of the Russian invasion of Ukraine, but it will not become severe unless the Western powers involve Russia’s oil and gas in their “economic war” once morest Moscow, in light of expectations that Russia’s aggressive military moves towards Ukraine will have a negative impact on the country. Cooperation in the oil market, which means that the formula for the success of Riyadh – Moscow – Abu Dhabi, and this strategic cooperation in managing the oil market over all these years, may face pressure if the war intensifies.
