Business as usual at next Opec+ meeting say experts

Reuters/Ahmed Yosri

• Online meeting this week
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Opec+ is unlikely to make any drastic policy changes when it holds its ministerial panel on Thursday, according to industry experts.

It is thought the organisation, which consists of the Saudi-led Opec bloc and the Russian-led non-Opec group with 10 participants, will probably focus on verifying members’ compliance with agreed output levels and their commitment to voluntary cuts.

Leading ministers from the organisation will meet online for a Joint Ministerial Monitoring Committee (JMMC), the first meeting after Opec+ agreed in November to deepen existing voluntary supply curbs this current quarter by an additional 900,000 barrels per day (bpd) to 2.2 million bpd.

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Separately, state-owned oil major Saudi Aramco said it had been instructed by the ministry of energy to end a scheme to raise overall capacity to 13 million bpd and instead maintain it at 12 million bpd.

The kingdom, Opec+’s main swing producer, has been producing only nine million bpd in an effort to boost oil prices.

Ole Hansen, head of commodity strategy at Saxo Bank, said that given how muted the price reaction had been to these cuts, the JMMC is unlikely to recommend continuing this policy.

Although JMMC’s role is to monitor output and export levels, it can call for a full Opec+ meeting or make recommendations on wider policy.

“I don’t think there will be any kind of dramatic decisions this time,” Ali Al Riyami, consultant and former director general of marketing at Oman’s Ministry of Energy and Minerals, told AGBI. “(Opec) will hold the horses at the moment.”

Al Riyami believed that Opec+ would observe how markets react to the actual output levels and then decide whether or not to extend a portion of the group’s voluntary oil production cuts. 

Complete data for January – the first month of the new restrictions – will not be available during the Opec+ meeting, Vijay Valecha, Century Financial’s chief investment officer, noted.

The latest supply curbs are due to last for the first quarter, and Riyadh has confirmed they could be extended later.

“Opec will likely do nothing apart from reaffirming its support for stable (high) prices amid all the current uncertainty related to Iran and Houthi activities in the Middle East,” Hansen added.

The Brent price was stable and traded at around $82 a barrel on Tuesday morning, down from Monday’s spike of $84, as the markets awaited the US response to a drone attack on US troops in Jordan. Houthi rebels’ strike on a Trafigura-operated fuel tanker over the weekend also increased tensions in the region.

“The weak macroeconomic picture has more long-term impact than headlines,” said Bill Farren-Price, a senior research fellow at the Oxford Institute for Energy Studies.

“Oil markets appear relatively anchored with prices trading well below their highs despite the tensions brewing in the Gaza Strip and the Red Sea,” Valecha added.

At least two vessels transporting fuel from Kuwait to Europe have changed their route to avoid the Red Sea over the weekend.

Other oil transporters, including Saudi Aramco and tankers hauling Russian oil, continued sailing through the Suez Canal.

“The abundant global (oil) reserves acted as a safeguard,” Yusuf Mansawala, Dubai-based CPT Markets chief market analyst, added. 

“Nevertheless, these incidents serve as a clear indication of the volatility in the region, potentially posing a threat in the future.”