Just hours before new Western sanctions on Russian crude exports are expected to come into force, the Organization of the Petroleum Exporting Countries, OPEC, says it is sticking with its existing policy of reducing oil output. The EU is boycotting seaborne Russian oil and is due to impose a price cap of US$60 per barrel on Russian exports. The G7 and Australia have also agreed to the US$60 ceiling.
OPEC’s 13 member countries say they will continue to restrict supply by 2 million barrels per day, a policy which began last month and is due to run through the end of 2023.
The Group often acts to change the supply and demand of oil, in order to control market prices and ensure high revenues for its members. But it says it’s ready to meet at any time to “address market developments if necessary.”
It is not yet clear how much oil the measures could take off the global market, which would tighten supply and drive up prices. The world’s second-largest oil producer has been able to reroute much, but not all, of its former Europe shipments to customers in India, China and Turkey.
The impact of the price cap is also up in the air because Russia has threatened to halt deliveries to countries that observe the ceiling. But analysts say the country would likely also find ways to evade the cap for some shipments.
On the other hand, oil has been trading at lower prices on fears that coronavirus outbreaks and China’s strict zero-COVID restrictions would reduce demand for fuel in one of the world’s major economies. Concerns about recessions in the US and Europe also raise the prospect of lower demand for gasoline and other fuel made from crude.