OPEC+ opts to ‘hunker down’ amid surging volatility and market uncertainty, holds steady on oil production

OPEC+ responded to surging volatility and growing market uncertainty by keeping its oil production unchanged. 

Unpredictability

The outcome of the brief online meeting on Sunday reflects the unpredictability of supply and demand in the coming months, and the wild gyrations in prices of the past week. 

Russia & China

The oil producers’ group has only just implemented the hefty 2 million barrel-a-day reduction agreed at its last gathering. Meanwhile, European Union sanctions on crude exports from Russia come into effect on Monday, and China is tentatively easing the Covid measures that have eroded its fuel consumption.

Brent crude plunged to its lowest level since September on Nov. 28, but ended up posting its biggest weekly gain in a month. The benchmark traded as much as 1.7% higher on Monday after the OPEC+ decision on signs of loosening virus curbs in China and uncertainties around Russian exports. 

The Oil Market

“With massive and offsetting fundamental and geopolitical risks bearing down on the oil market, ministers understandably opted to hold steady and hunker down,” said Bob McNally, president of Rapidan Energy Advisers LLC.

The decision by the Organization of Petroleum Exporting Countries and its allies should hold for at least a few months. The group’s Joint Ministerial Monitoring Committee, led by Saudi Arabia and Russia, will meet again in February. The outlook could be clearer by then, and the panel has the power to call extraordinary meetings if it thinks output policy may need to change. 

About E. J. McKay

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