Opec+ to keep policy unchanged, say delegates

The Opec+ Joint Ministerial Monitoring Committee (JMMC) will reaffirm its support for the alliance's production policy when it meets virtually on 3 April, delegates told Argus.

The collapse of California's Silicon Valley Bank and the ensuing rescue of Switzerland's Credit Suisse sent shockwaves through the global banking system, and provoked fears that the crisis could set off a wider financial crisis sent oil prices to their lowest level since December 2021.

This put the spotlight on the 23-member Opec+ alliance's policy, and raised questions about whether the group would cut output to get ahead of a potentially oil demand-sapping recession. But several delegates canvassed by Argus said there are no plans to alter course.

"The markets are currently so volatile," a delegate said, attributing the recent oil price swings to jittery paper markets rather than any underlying change in supply and demand balances.

The alliance has steadfastly argued that any change to policy would require a change in fundamentals, something it currently does not see. Front-month Brent has already recovered some of its losses as concerns about a wider banking crisis appear to have dissipated.

Opec+ is implementing a nominal 2mn b/d cut to its overall output ceiling until the end of the year — something it agreed to in October 2022. While the JMMC can make recommendations based on its assessment of the market, and call for an extraordinary ministerial meeting, it is not a decision-making body. Opec+ is not scheduled to hold a ministerial conference until June — in theory, this is the only arena in which a decision to amend production policy can be taken.

Opec's own forecasts show rising demand in the second half of this year, and the IEA has projected the market to flip from a surplus in the first half to a deficit in the second. As such, any move to cut output now would only serve to widen the gap later in the year.

But the precarious nature of global oil supply means the picture could change.

Opec member Iraq started something of an involuntary cut this week after an arbitration ruling prompted Turkey to halt a pipeline sending crude to its Ceyhan port.

With storage space running out, foreign operators have started to roll back production in a region that last year exported 450,000 b/d — equal to almost 0.5pc of global oil demand.

By Aydin Calik, Nader Itayim and Bachar Halabi