Estimates by the oil cartel suggest it doesn’t expect Russian crude-oil production to be badly hit by Western sanctions
OPEC maintained its outlook for global oil supply and demand on Tuesday, suggesting it doesn’t expect Western attempts to set a price cap for Russian oil to have much impact on global crude flows.
The Organization of the Petroleum Exporting Countries left its forecasts for oil-supply growth from non-OPEC countries largely unchanged at 1.9 million barrels a day in 2022 and 1.5 million barrels a day in 2023.
The Vienna-based oil producers group also held off from revising its oil demand growth forecasts for both this year and next. It expects oil demand to grow by 2.6 million barrels a day this year and 2.2 million barrels a day in 2023.
OPEC’s latest forecasts suggest the group sees little reason so far to expect Russian crude-oil production to be badly hit by the latest Western sanctions targeting Russia’s oil revenues. A European Union ban on Russian crude oil imports came into effect at the start of the month as did a U.S.-led plan to cap the price of Russian oil sold internationally.
But while the measures had prompted fears that more Russian crude oil could be stranded in the country, the initial reaction from oil markets has been muted. Meanwhile, Russia has yet to carry out threats that it would respond by intentionally cutting production.
In its monthly oil market report Tuesday, OPEC actually revised higher its forecast for Russian crude output next year to 10.11 million barrels a day from an earlier estimate of 10.08 million barrels a day but noted that there was “high uncertainty” surrounding Russia’s crude production.
The EU ban on Russian crude imports has seen Russian crude-oil flows to Europe drop by close to 1 million barrels a day in November, year-over-year, OPEC said, but other regions had compensated by buying more Russian oil. Turkish imports of Russian crude had increased, OPEC noted, reaching 400,000 barrels a day from minor levels last year.
The EU ban and price cap are aimed at constricting the Kremlin’s oil revenues while still allowing enough Russian barrels to flow to global energy markets to prevent oil prices from rising. Previous sanctions targeting Russia’s oil industry have weakened its oil output but its oil income has remained high as soaring oil prices have compensated for fewer customers.
The price-cap plan, which counts the Group of Seven nations and Australia among its members, bans members’ shipping and insurance firms from handling Russian crude oil cargoes unless the oil was sold below $60 a barrel.
As most shipping and insurance firms are based in G-7 nations, the ban makes it hard for Moscow to sell its oil above the price cap. Countries not party to the plan can continue buying Russian oil and using Western shipping and insurance services if the oil is bought below the price cap.
In response, Russia has said it won’t sell energy supplies to countries involved in the price cap and analysts feared Russia could be forced to cut its oil output if it failed to find alternative buyers of its crude. But at $60 a barrel, some analysts have said the cap is too high to have much effect as Russia is already selling most of its crude at a similar price.
Oil prices have largely shrugged off the measures. Last week, Brent crude, the international oil benchmark, fell below $80 a barrel for the first time since the start of the year. On Tuesday, Brent rose 1.1% to $78.87 a barrel.
Also in the report Tuesday, OPEC said its own output had declined by 744,000 barrels a day in November to 28.8 million barrels a day, with Saudi Arabia’s output dropping by around 400,000 barrels a day.
The cartel earlier this month opted to keep its production levels unchanged, but in doing so locked in a 2 million-barrel-a-day cut decided in October.
Write to Will Horner at email@example.com