There was no surprise that a top meeting of OPEC+ ministers opted to keep output policy unchanged since the global crude oil market is almost exactly where the exporter group wants it.
OPEC+’s ministerial committee on Wednesday kept the current output targets but did note that some countries had been over-producing and had undertaken to increase compliance. This means that the voluntary production cuts of 2.2 million barrels per day (bpd) will remain in place until at least the end of June, joining the existing 3.66 million bpd of cuts agreed in 2022.
Crude oil prices have rallied in recent months, with benchmark Brent futures hitting a six-month high and coming within one cent of $90 a barrel during Wednesday’s trade. OPEC+ doesn’t formally target an oil price level, but it’s believed that most of the member countries currently favour a price closer to $90 a barrel than the $70 levels from late last year.
With the price now at that level, the trick for OPEC+ is getting $90 to act as an anchor around which the price can trade with the usual daily volatility, which is often driven by news headlines on events that threaten supply or change anticipated demand. The risk is that $90 a barrel is surpassed and crude heads back toward $100, which is likely to fuel a new round of inflation in importing countries, as well as hurting anticipated demand growth.
Brent averaged about $82.10 a barrel in 2023, so any level well in excess of that will add to inflationary pressures and make monetary easing by central banks all the harder to deliver. Stronger oil prices may also crimp demand, especially in the price-sensitive developing economies in Asia, the world’s top importing region.
Asian demand has accelerated in recent months, with LSEG Oil Research data showing March imports of 27.33 million bpd, up from 26.68 million bpd in February and the highest since June last year. The question for the market is whether higher crude prices and under pressure refining margins will result in Asian import demand growth weakening, or whether the economic recovery story in China and the ongoing strength in India will be enough to keep demand robust.
After two years of turmoil,
