Saudi Arabia, Russia and their allies are expected to stick to their policy of modest increases in oil production when they meet on Thursday after the EU banned most imports from Moscow.
European Union leaders agreed on Monday to ban more than two-thirds of Russian oil imports, tightening the economic screws on the country following its invasion of neighboring Ukraine.
That pushed up oil prices, which have already hit record highs so far this year, under pressure from the 23 members of OPEC+ to open the tabs wider and relieve the market.
Brent, the international benchmark, hit a two-month high above $124 a barrel while the US contract, WTI, rose above $119.
But analysts say OPEC+ will stick to its strategy of only slightly increasing output at its monthly video conference on Thursday as it remains united with Moscow.
“With Russia being one of the two most important members of the alliance (alongside Saudi Arabia), any decision to increase production has become highly political,” analyst Craig Erlam told TAUT. of the OANDA trading platform.
“Both because (Russia) cannot sell what it already produces because of the sanctions and maybe even because it wants the prices to be too high and keep the pressure on the countries it consider as ‘unfriendly’,” he said.
The 13 members of the Organization of the Petroleum Exporting Countries chaired by Saudi Arabia and their 10 partners led by Russia cut production significantly in 2020 as demand fell due to the coronavirus pandemic and global shutdowns.
They have modestly increased production to around 400,000 barrels per day every month since last year and have resisted pressure from major consumers, including the United States, to open the tabs further.
Ipek Ozkardeskaya, an analyst at Swissquote Bank, said Thursday’s meeting “looked like a formality”.
“There is little hope of the OPEC nations announcing anything that would relieve the market,” she said.
– Unable to meet quotas –
Analysts also noted that while the group was willing to increase production, several of its members failed to meet quotas, leading to lower supply in the market.
“Ultimately, the group is missing its already modest targets with bigger and bigger margins every month, so you have to wonder how much impact any increase would have if countries simply didn’t have the capacity to increase further,” Erlam said.
In a statement on Friday, the wealthy Group of Seven countries underscored OPEC’s “key role” and again called on “oil and gas producing nations to act responsibly and respond to tightening international markets.” “.
OPEC was created in 1960 and joined by the 10 partners by a declaration of 2016. Its mission is “to ensure the stabilization of the oil markets”.
But OPEC+ is expected to “rebuff calls from the West to accelerate its oil production increases, instead sticking to its existing plans,” said Victoria Scholar, an analyst at Interactive Investor.