[Asia Economy Reporter Jeong Hyunjin] The 'Organization of the Petroleum Exporting Countries Plus (OPEC+),' a coalition of major oil-producing countries including Saudi Arabia and Russia, has decided to continue its policy of cutting oil production by 2 million barrels per day. This decision is interpreted as maintaining the existing policy amid ongoing turmoil in the energy market caused by the European Union's (EU) implementation of a price cap on Russian crude oil and the possibility of China easing its 'zero-COVID' policy.
According to the Wall Street Journal (WSJ) and others on the 4th (local time), OPEC+ stated in a press release following its regular meeting that it would maintain the agreed production cut policy from the previous meeting and would respond immediately if necessary to balance supply and demand and stabilize prices in the future. WSJ evaluated, "Ahead of a 'momentous week' in the global energy market, marked by the EU's sanctions on Russian crude oil exports and Chinese President Xi Jinping's scheduled visit to Saudi Arabia, OPEC+ decided to continue its production cut policy."
Earlier, at the regular meeting in October, OPEC+ agreed to reduce daily oil production by 2 million barrels starting in November and maintain this until the end of next year. Although the United States and other Western countries openly criticized this as "cooperating with Russia," OPEC+ chose to continue its existing policy.
In the statement released that day, OPEC+ evaluated, "In retrospect, the decision (October production cut) was necessary as market participants and was an appropriate action to stabilize the global oil market." Bader Al-Mulla, Kuwait's Minister of Energy, stated, "We must closely monitor the impact of the global economic slowdown, soaring inflation, and high interest rates on oil demand."
It was reported that within OPEC+, a consensus had already formed before the meeting that it was not the right time to increase oil production.
Notably, this decision came after the EU, the Group of Seven (G7), and Australia agreed to set a price cap of $60 per barrel on Russian crude oil. Some oil ministers reportedly expressed concerns about the introduction of the Russian crude oil price cap during this meeting.
Although meetings are generally held during weekdays, WSJ reported that the sudden weekend meeting this time appears to have been in consideration of the EU's implementation of the Russian crude oil price cap on the 5th. The OPEC delegation stated that it has become even more difficult to predict the impact of the EU's Russian crude oil price cap on the market than it was in October.
Additionally, the changing situation in China has increased uncertainty and seems to have influenced OPEC+'s decision. China has maintained strict zero-COVID lockdown measures, but recent protests have led to signs of easing these restrictions. In this context, President Xi is expected to visit Saudi Arabia on the 8th to discuss matters related to the energy market.
Bob McNally, chairman of Rapidan Energy Group and former advisor to U.S. President George W. Bush, evaluated, "In a situation where the oil market is facing tremendous fundamental and geopolitical risks, it is natural that (oil-producing country) ministers chose to maintain stability and stick to the existing approach." Giovanni Staunovo, an analyst at UBS, told Bloomberg, "Due to news coming out of China and changes in central bank policies, the oil market is expected to continue experiencing volatility in the short term."
The next regular OPEC+ meeting is scheduled for June 4 next year. However, OPEC has warned, "We are ready to meet at any time if necessary and will take immediate additional measures to address market conditions."
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