Walking the Line
The OPEC+ announced Sunday that the cartel of oil exporting nations will maintain current production targets, citing uncertainty about newly announced Western price caps on Russian oil sales. Saudi-led OPEC and its allied exporters, led by Russia, agreed to cut production by 2 million barrels a day in October, angering the White House as the U.S. grappled with high gas prices weeks before the midterm elections. Oil and gasoline prices have fallen significantly since then for various reasons.
OPEC+ said Sunday that its October production cut has been "recognized in retrospect by the market participants to have been the necessary and the right course of action towards stabilizing global oil markets."
The two Western measures aimed at limiting (but not ending) Russian oil exports during its war on Ukraine take effect Monday. Russia has taken steps to mitigate the first measure, a European Union boycott of most Russian oil, by rerouting most of its exports to China, India, and Turkey. And Moscow reaffirmed Sunday that it will try to ignore the second measure — a $60 cap on Russian oil sales, enforced by EU and Group of Seven nations refusing to ship or insure shipments of Russian oil selling at higher prices — by not selling to countries that agree to the cap.
Russian oil is already selling well below the global price of about $85 a barrel — Argus Media pegs Russian oil prices at about $48 a barrel — so "Moscow could continue to sell while rejecting the cap in principle," The Associated Press reports. "Russia would likely try to evade the cap by organizing its own insurance and using the world's shadowy fleet of off-the-books tankers, as Iran and Venezuela have done, but that would be costly and cumbersome."
"OPEC had considered an array of options before Sunday's unusual meeting," The Wall Street Journal reports. Some, like Saudi oil minister Prince Abdulaziz bin Salman, floated more production cuts to offset the depressed oil prices amid a drop-off in demand from top oil importer China, and others suggested raising production to make up for expected Russian shortfalls after the price caps take effect. OPEC+ isn't scheduled to meet again on production targets until June, but the alliance said Sunday it is ready "to meet at any time and take immediate additional measures to address market developments" as needed.