OPEC Meeting: OPEC+ Likely To Stay The Course

OPEC+ is likely to stay the course during its next Joint Ministerial Monitoring Committee (JMMC) meeting on Monday, with oil prices rebounding after fears from the banking sector sent prices to the lowest level since December 2021 – allowing OPEC to sit back from taking action. The recent supply disruption of around 450kbpd of Kurdish exports, which helped prices to rebound, has likely strengthened the likelihood for the group to stay with the October 2022 2mbpd output cut decision.

• The next JMMC meeting is scheduled for Monday 3 April 2023. The JMMC is tasked with ensuring the objectives of OPEC and its allies and monitors and reviews the oil markets. It last met on 1 February. The JMMC holds a meeting every two months.
• OPEC+ previously reiterated that the group’s policy is based on fundamentals and the market in Q1 looks broadly balanced. The latest price declines were not based on supply and demand in the crude market but influenced by turmoil in the financial sector, delegates reiterated.
• Ahead of the meeting, several delegates have confirmed the group is likely to adhere to its current agreement to reduce oil production at its next meeting as prices rebounded amid Kurdish supply constraints. Group leader Saudi Arabia has said publicly that the group should keep supplies steady for the whole of 2023.
• A hawkish fed, fears of recession and the banking sector turmoil has caused a sharp sell-off in mid-March that send crude prices sharply falling, with Brent crude prices plunging to intra-day lows of around 70$/bbl. Supply constraints from Iraq’s Kurdistan region and easing fears from the banking sector have supported oil prices to rebound to 78-80$/bbl.
• On the supply side, OPEC+ is closely watching developments of Russian crude output after the country’s announced to cut production by 500kbpd from March until the end of June. So far, the output cut has not fully materialised with production cuts at 300kbpd in the first three weeks of March, versus an expected cut of 500kbpd according to Reuters sources.
• Added supply pressure has come this week from Iraq’s Kurdistan region that was forced to halt around 450kbpd of crude exports on 25 March through a pipeline that runs from its northern Kirkuk oil fields to the Turkish port of Ceyhan. Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government to export oil to Ceyhan without Baghdad's consent. Oil firms have been reducing operations in the region and others are likely to follow in the coming days if the Iraqi and Kurdish government do not find a resolution during the next meeting - scheduled for the week starting 3 April.
• On the demand side, China remains at the forefront of 2023 oil demand growth expectations and OPEC is closely watching any developments, following China’s relaxation of Covid policies. According to the IEA, Chinese oil demand is forecast to rise by 900kbpd this year.
• China’s demand outlook for this year remains positive but some indicators, such as February’s weak CPI number, are highlighting China’s full demand return could be bumpy. In addition, China’s crude imports averaged 10.4mbpd in January-February, which was down by 1.3% year on year, while tanker-tracking data suggested an uptick in February imports of 11.85mbpd.
• The next full OPEC+ ministerial meeting is scheduled for 4 June, in which it will review the output policy for the second half of this year. The group last met on 2 December.