<article><p class="lead">Opec+ today agreed to stick to a scheduled 432,000 b/d increase in its June crude production ceiling, in line with the roadmap outlined last summer, according to delegates.</p><p>The decision to stay the course was widely anticipated and comes as mounting uncertainty over Russian production is tempered by continued pressure on Chinese oil demand growth, arising from strict Covid lockdown measures.</p><p>Russia's oil sector has faced strong headwinds since the invasion of Ukraine, with many companies shunning Russian imports and domestic consumption slowing down. The pressure on Moscow will intensify if the EU goes ahead with <a href="https://direct.argusmedia.com/newsandanalysis/article/2327863">its plan</a> to phase out Russian oil by the end of the year.</p><p>Even before the EU proposal was tabled, Moscow acknowledged that its production is on course for a sharp drop. Finance minister Anton Siluanov said last month that Russian crude output could decline by around 17pc this year because of falling demand from western buyers. Oil prices are being supported by expectations for a slowdown in Russian supply, with the front-month Ice Brent futures contract topping $110/bl earlier today. </p><p>The Opec+ group views the disruption to Russian supply as a geopolitical event — the impact of which remains difficult to quantify — rather than a fundamental market development that requires its response. Nevertheless, many delegates have acknowledged, both privately and publicly, that the coalition has limited room to compensate for the loss of Russian output, even if wanted to. The group, as a whole, undershot its March target by almost 1.5mn b/d, according to <i>Argus</i> estimates. Furthermore, Saudi Arabia and the UAE are the only Opec members with any meaningful spare capacity.</p><p>Demand concerns are offsetting the tightening supply picture though. China has imposed strict lockdown measures in Shanghai and neighbouring regions, and even in Beijing, to tackle a rise in Covid-19 infections. The restrictions led to Chinese refineries cutting runs by 1.3mn b/d in April, an <i>Argus</i> survey indicates. Meanwhile, a report prepared by the Opec secretariat for the Opec+ Joint Technical Committee (JTC) meeting yesterday forecast that global oil supply will <a href="https://direct.argusmedia.com/newsandanalysis/article/2327946">exceed demand by 1.9mn b/d this year</a>.</p><p>The next Opec+ meeting to decide on July quotas is scheduled for 2 June. </p><p class="bylines">By Nader Itayim, Ruxandra Iordache and James Keates</p></article>
