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Opec-Plus Shifts Toward Cautious Stance

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Opec-plus has decided to switch its upcoming ministerial meeting to a virtual format instead of an in-person gathering in Vienna, sources told Energy Intelligence on Tuesday.

The move could indicate that the group wants to downplay expectations about any major changes to current production policy, given a host of uncertainties and a recent weakening of oil prices.

The alliance had come under pressure from the US to review its October decision to cut production by a nominal 2 million barrels per day from November through the end of next year.

And there had been hints that such a move would at least be considered, if market conditions were right.

However, Opec-plus now faces a highly uncertain market environment that has seen oil prices slide by about $10 per barrel in the last two weeks.

Opec-plus is due to meet on Dec. 4, one day before the introduction of EU sanctions on imports of Russian crude and parallel G7 plans to impose a price cap on Russian exports.

Other uncertainties include the outlook for pandemic lockdowns in China and the state of the global economy.

Some Opec-plus delegates believe the group needs more time to review and fully understand the impact of these developments before making any changes to the current pact.

Two delegates told Energy Intelligence that keeping the current production policy in place is a likely option.

There was no public announcement on Tuesday from the Opec Secretariat about a change of format for the meeting. However, delegates told Energy Intelligence that all ministers had received a notification indicating that the meeting would now be virtual.

Softer US Stance?

At its last meeting in October, Opec-plus said it would continue to monitor the market, that the Joint Ministerial Monitoring Committee (JMMC) would meet every two months, and that, if required, the group could call an emergency meeting at any time.

That meeting — which led to the announcement of the 2 million b/d production cut — was an in-person event in Vienna.

It included a press conference at which several officials explained that the decision was not political but rather a pre-emptive move to adjust supply in anticipation of a demand impact as the global economy slows down.

The decision drew a furious reaction from the US, which accused Saudi Arabia of effectively supporting Russia in its war with Ukraine.

The Biden administration was keen at the time to tamp down oil prices, given the approach of US midterm elections and concerns about a global recession.

But there are indications now that with concerns about a softening of demand causing prices to fall, Washington accepts that Opec-plus is less likely to relax the production cut that was implemented this month.

Washington hopes that the group does not deepen its cuts, but would be "understanding" if it decides to keep the current agreement unchanged, US-based sources told Energy Intelligence last week.

Given the array of uncertainties, some market analysts believe that maintaining the status quo would provide a foundation for keeping prices in the $80s and buy Opec-plus more time to assess its next move.

Some Opec-plus nations, particularly Iraq, had previously suggested that revisions to production baselines could be discussed at the meeting.

However, delegates told Energy Intelligence last week that this issue would not be discussed at the upcoming meeting.

Topics:
Opec/Opec-Plus, Oil Supply, Oil Demand, Crude Oil, Oil Prices
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