Opec+ JMMC recommends status quo

The Opec+ coalition's Joint Ministerial Monitoring Committee (JMMC) recommended no changes to the group's output policy at its meeting today.

The JMMC, which is made up of key Opec+ ministers, is not a decision-making body but it can make recommendations based on its assessment of the oil market and also has the authority to recommend an extraordinary ministerial meeting be held if market conditions warrant. As it stands, Opec+ is not due to hold a ministerial conference until June.

The JMMC's recommendation to stay the course on current crude production targets comes against the background of similar supply and demand uncertainties that underpinned the group's December decision to roll over output quotas, notably the outlook for Russian exports and Chinese consumption.

On the supply side, the EU's embargo on Russian oil products is due to come into effect on 5 February. Its impact, coupled with the effect of the ban on Russian seaborne crude imports and the G7-led $60/bl price cap on Russian crude sales, remains unclear. Russian crude exports have shown resilience in the face of the embargo so far, but a decree from President Vladimir Putin banning Russian producers from selling under the terms of the price cap may weigh on output.

On the demand side, the pace of China's recovery, following Beijing's decision to abandon its zero-Covid policies in December, is another major uncertainty. There are signs that the economy of the world's largest crude importer is bouncing back, setting a strong floor under oil prices, but it could be several months before there is a full recovery to pre-pandemic levels. Opec's latest forecast is for Chinese oil demand to increase by 510,000 b/d this year, following an estimated 210,000 b/d decline in 2022.

Continued central bank measures to combat inflation with rising interest rates could put some downward pressure on oil demand globally. The US Federal Reserve is due to meet later today, followed on 2 February by the Bank of England and the European Central Bank.

The JMMC's next meeting is scheduled for 3 April.

By Bachar Halabi