Major oil producing countries of the OPEC+ group are set to convene on Sunday to decide on their production scheme for January onwards amid unfolding global uncertainties over supply and demand.
Industry experts differ on the predictions about the possible decisions that the producers will take, with options ranging from keeping the output status quo or increasing it significantly.
The 23-member group of the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, had agreed in October to cut output by 2 million barrels per day (bpd) as of November.
The next ministerial meeting, scheduled for Sunday, to discuss the latest market developments and review current production volumes comes amid lingering demand concerns caused by months of disruptive COVID-19 lockdowns and related protests in China, the world's largest crude importer.
The country's unrest prompted sharp drops in oil prices, raising the prospect of a production cut decision at the OPEC+ meeting on Sunday.
In response to reports of OPEC+ plans to increase oil supply, Saudi Arabian Energy Minister Abdulaziz bin Salman reiterated last week, on behalf of the OPEC+ de facto leader, Saudi Arabia, that the current production cut would last until the end of 2023 while expressing willingness to make further cuts based on supply-demand dynamics.
The meeting also comes one day before the European Union’s (EU) ban on Russian seaborne crude oil exports and a controversial price cap, which will come into force on Dec. 5, further muddying the waters as to the group's possible decision.
Brent crude, which surpassed $139 per barrel on March 7 due to supply concerns from the Russia-Ukraine war, has been trading below $100 since August as global recessionary concerns intensify while raising demand concerns.
In light of these developments, the OPEC+ group decided on Oct. 5 to reduce oil production by 2 million bpd beginning in November in order to prevent further price declines.
Accordingly, the OPEC group revised down its forecast for global oil demand growth this year and next year in its latest monthly oil market report, reiterating its expectation for weaker oil demand.
'The problem for OPEC is December and the first quarter of 2023,' Energy Outlook Advisors Managing Partner Anas Alhajji told Anadolu Agency.
He maintains the current output cut of 2 million bpd is not enough to maintain market stability and is unable to prevent oil prices from declining.
'The optimal outcome is an additional cut and the less optimal is to stay the course,' he said.
He considers that maintaining the status quo could reduce oil prices by more than $10 per barrel, whereas a small cut would maintain the current prices. However, he said a large cut, especially for the first quarter of next year, 'would push Brent prices above $90 per barrel.'
He believes that several factors, apart from China, are contributing to the fall in prices, citing the Biden administration’s release of 15 million barrels of oil from the Strategic Petroleum Reserves last week along with the appreciation of the US dollar, which he said 'is wreaking havoc on global oil demand growth as the cost of importing oil in countries with depreciating currencies goes through the roof.'
He also specified the expectations of a global recession next year as a factor.
Carole Nakhle, CEO of Crystol Energy's research and training company, pointed to three possible outcomes from the meeting: 'increase production, as rumored a week ago, cut production, or maintain the same level.'
She said the likely outcome would be maintaining the same output, and she discounted the possibility of raising output given the current market conditions.
'While one can argue that oil prices today are trading around the same levels as before the October meeting of OPEC+, whereby the group announced a cut of 2 million bpd, the uncertain consequences of the EU sanctions and the oil price cap support the last scenario of maintaining the same output level for now,' Nakhle said.
By Firdevs Yuksel and Sibel Morrow
Anadolu Agency
energy@aa.com.tr