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Opec-Plus Stands Pat Ahead of Uncertain 2023

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Opec-plus' decision this week to keep its current output policy in place and take a "wait and see" approach to supply management is not surprising given the many uncertainties facing oil markets. The producer group's focus now squarely turns to 2023 and events that could swing oil markets in either direction, including a global recession, the reopening of China, and the response of Russian production to EU embargoes and a G7 price cap. The status quo means that Opec-plus' headline 2 million barrel per day cut, announced in early October, will remain in effect for now, but ministers say they can react quickly to market shifts by calling an emergency meeting in the future, if necessary. Benchmark Brent's drop below $80 per barrel this week shows how volatile and unpredictable this oil market can be. By standing pat, Opec-plus can see how the EU ban and price cap impact Russian volumes, while it gets a better sense of the health of oil demand in the face of recession and the effects of China's retreat from sweeping zero-Covid-19 policies. Brent's drop below $80/bbl likely removes one immediate concern for Opec-plus — further releases from the US Strategic Petroleum Reserve. At Sunday's virtual meeting, Opec-plus reiterated its readiness to meet quickly “to address market developments and support the balance of the oil market and its stability if necessary.” Although the October cut decision enraged Washington, recent developments suggest it was the right call as demand concerns mount.

Topics:
Opec/Opec-Plus, Opec-Plus Supply , Non-Opec Supply, Oil Supply, Oil Demand
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