OPEC+ keeps oil targets amid weakening economy, Russian sanctions

The cartel wants to measure the impact of two measures aimed at hitting Russia’s oil revenues: price cap and EU boycott.

OPEC and its oil-producing allies have agreed to stick to their output targets as oil markets struggle to assess the impact of a slowing Chinese economy on demand and a G7 price cap on Russian oil on supply.

The decision at an OPEC+ meeting on Sunday was taken a day before the planned implementation of two measures to depress Russian oil revenues in response to the invasion of Ukraine: a boycott of most Russian oil imports by the European Union and a price cap of $60 per barrel on Russian exports imposed by the EU, the Group of Seven countries and Australia.

It is not yet clear how much Russian oil the two measures could take from the world market, which could limit supply and drive up prices.

The world’s second largest oil producer has managed to divert many of the shipments it once made to Europe to customers in India, China and Turkey.

Moscow has said it will not sell its oil below the price cap and is analyzing how to respond.

OPEC+, which includes Russia, angered the United States and other Western countries in October when it agreed to cut production by 2 million barrels per day from November to the end of 2023, about 2 percent of world demand.

Washington accused the group and the world’s largest oil producer, Saudi Arabia, of siding with Russia despite Moscow’s war in Ukraine.

OPEC+ argued that it had cut production because of a weaker economic outlook. Oil prices have fallen since October due to slower Chinese and global economic growth and higher interest rates, leading to speculation in the market that the group could cut oil production again.

But on Sunday, OPEC+ decided to leave policy unchanged. Key ministers will meet on February 1, while a full meeting is scheduled for June 3 and 4.

There was no discussion of Russia’s oil price cap at the OPEC+ meeting, sources told Reuters news agency.

JP Morgan said Friday that OPEC+ could review production in the new year based on new data on Chinese demand trends and consumer compliance with price caps on Russian crude production and tanker flow.

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