A committee meeting for the Organization of the Petroleum Exporting Countries and their allies next week isn’t expected to result in any changes to oil production levels, but attendees will have a lot to discuss as the reopening of China’s economy and the European Union’s ban on Russian oil products raise uncertainties in the market.
The OPEC+ Joint Ministerial Monitoring Committee (JMMC) will meet on Feb. 1 to review the oil market. It meets every two months, while the next official meeting of the policy-setting OPEC+ members is scheduled for June.
Market “hype” about the upcoming JMMC meeting is “unworthy, since the group has no decision making authority,” said Manish Raj, managing director at Velandera Energy Partners. The committee has the ability to call a full OPEC+ meeting, but “next week’s JMMC is just a foregone conclusion.”
Prices for oil began this year on a sour note, with prices sharply lower in the first two trading days of the year, then rallying as news China’s decision to lift COVID-19 restrictions looked to boost energy demand.
On Thursday, U.S. benchmark West Texas Intermediate crude CL.1, -0.38% CLH23, -0.38% for March delivery settled at $81.01 a barrel on the New York Mercantile Exchange, up 0.9% month to date. Global benchmark March Brent crude settled at $87.47 on ICE Futures Europe, up 1.8% for the month so far.
“All indications suggest that [the JMMC] will stay the course on the 2 [million barrel per day] production cut as they await to assess the durability of the China reopening, as well as the impact of the next round of European energy sanctions on Russian exports,” strategists at RBC Capital Markets, led by Helima Croft, wrote in a Thursday research note.
At a meeting in December, OPEC+ decided to continue with a 2 million-barrel production cut that began in November through to the end of 2023. That meeting came a day ahead of the implementation of the EU’s ban on importing Russian seaborne crude and a price cap of $60 a barrel on Russian oil.
The Russian oil ban has “yet to make a dent in volume, as the Asian buyers keep guzzling all available Russia oil,” said Velandera’s Raj. Refined oil products, especially diesel, are “another story altogether since neither China nor India import diesel or gasoline, he said, noting that they are both exporters. “So whom will Russia sell it diesel to?”
The EU will ban imports of Russian oil products on Feb. 5.
Source: MarketWatch