On Monday, the Organization of Petroleum Exporting Countries (OPEC) informed the European Union that Russia crude oil sanctions will erase about 7 million barrels per day from the global oil market.
According to Reuters, the cartel warned European Union member nations that it would be impossible to replace 7 million barrels per day given the current demand level and disruption in supplies.
OPEC Secretary-General Mohammad Barkindo was quoted as saying, “we could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions,”
“Considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude.”
However, European Union representative encouraged OPEC to proffer solutions that will increase Crude Oil deliveries inorder to curb the continuous increase price of crude oil in the globa market. This the EU believes is the responsibility of OPEC
Following the sactions imposed by Washington and Brussels on Moscow last month, the price of crude oil reached a 14-year high. This promted the United States and International Energy Agency request to OPEC to increase the global supply of crude oil to the market in other to regulate price.
However, OPEC Sec. Gen. Barkindo said the current highly volatile market was a result of “non-fundamental factors” outside OPEC’s control, in a signal the group would not pump more.
OPEC+, which consists of OPEC and other producers including Russia, will raise output by about 432,000 barrels per day in May, as part of a gradual unwinding of output cuts made during the worst of the COVID-19 pandemic.
The EU-OPEC meeting on Monday afternoon was the latest in a dialogue launched between the two sides in 2005.
Russian oil has been excluded from EU sanctions so far. But after the 27-country bloc agreed last week to sanction Russian coal – its first to target energy supplies – some senior EU officials said oil could be next.
The European Commission is drafting proposals for an oil embargo on Russia, the foreign ministers of Ireland, Lithuania and the Netherlands said on Monday at a meeting of EU foreign ministers in Luxembourg, although there was no agreement to ban Russian crude.
Australia, Canada and the United States, who are less reliant on Russian supply than Europe, have already banned Russian oil purchases.
EU countries are split over whether to follow suit, given their higher dependency and the potential for the move to push up already high energy prices in Europe.
The EU expects its oil use to decrease 30 percent by 2030, from 2015 levels, under its planned policies to fight climate change – though in the short term, an embargo would trigger a dash to replace Russian oil with alternative supplies.
Oil Prices Hold Steady Ahead of Crucial OPEC+ Meeting Amidst Fed Rate Hike Signals
Oil prices maintained their significant gains as traders anticipate the outcome of a crucial OPEC+ meeting on supply while considering signals from the Federal Reserve regarding interest rate policies.
Global benchmark Brent hovered below $82 a barrel, having surged over 2% on Tuesday, while West Texas Intermediate traded under $77.
The OPEC+ meeting, scheduled for Thursday to set policies for 2024, is currently grappling with a dispute over output quotas for some African members.
The recent rise in crude prices is underpinned by a weakening dollar, with a Bloomberg gauge of the US currency reaching its lowest level since August.
Federal Reserve policymakers, including Governor Christopher Waller, have hinted at an impending pause in the series of rate hikes, contributing to the bullish sentiment in oil markets.
A softer dollar enhances the appeal of commodities for international buyers.
Yeap Jun Rong, a market strategist for IG Asia Pte in Singapore, commented on the interplay of factors, stating, “The US dollar was dragged lower on a build-up in dovish expectations, which was very much cheered on by oil prices.”
However, concerns persist about OPEC+’s ability to address the challenges in the oil market effectively.
Despite the recent gains, oil is on track for a consecutive monthly decline due to increased supply from non-OPEC countries, intensifying pressure on the cartel and its allies to consider more significant output cuts.
The International Energy Agency’s earlier assessment indicated a potential return to a global crude surplus in the coming year.
In the US, the American Petroleum Institute reported a 817,000-barrel decline in nationwide inventories last week, potentially marking the first drop in six weeks, pending confirmation from government data.
This development may add support to oil prices and impact the ongoing dynamics in the energy market.
Oil Prices Stabilize as OPEC+ Weighs Deeper Output Cuts Amid Global Supply Concerns
Market Evaluates OPEC+ Decision Amidst Bearish Sentiment and Global Supply Worries
A Relaxed Start to the Week But Much More to Come, OPEC+ Eyed
By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
It’s been quite a calm start to the week which isn’t entirely surprising given the lack of events on the calendar today. That said, things are expected to pick up with the rest of the week serving up some big economic releases and a hugely important OPEC+ meeting.
All data now, particularly that of the US, is being looked at through the prism of what it will mean for the final central bank meeting of the year and the new projections it’ll be accompanied by.
Since the last meeting, the data has been encouraging and we’ll get another batch before the Fed meets on 13 December. This week we’ll get the October PCE inflation data – the Fed’s preferred measure – as well as third quarter GDP, ISM manufacturing and jobless claims.
Outside of the US, we’ll get flash HICP inflation data for the eurozone, PMIs from China, CPI figures for Australia and a rate decision from the RBNZ. On top of all that, there’s a plethora of central bank speakers making appearances which will keep us on our toes.
BoE Governor Bailey got the week off to a start on that front, pushing back against expectations for rate cuts from Q2, claiming he doesn’t expect any for the “foreseeable future”. A vague commitment as ever but all we can expect from policymakers for now. There’s still a way to go and as Bailey highlighted, getting from peak to now is likely to be much easier than from here to 2%.
Oil choppy ahead of Thursday’s OPEC+ meeting
Arguably, the OPEC+ meeting will be the week’s most impactful event. Not just because any decision could have direct consequences for price and therefore inflation but also due to the meeting already being pushed back by four days, so there’s clearly some disagreement within the alliance.
The group has always found a way to get an agreement over the line before, even if that means the biggest producers taking on more of the additional commitments so it’s probably safe to say something similar will be achieved this week. But the question is how far they’ll push it, given the recent trend in oil prices and increasing concerns around global growth next year.
Gold eyeing record highs?
Gold has got the week off to a strong start, up around half a percent and hitting a six-month high. It just about managed to end last week above the psychologically challenging $2,000 level – where it’s repeatedly been pushed back from over the last month – and it seems that has propelled it on today.
We’re still seeing some push back though but this break has been backed by softer US data in recent weeks and less hawkish commentary from the Fed. That may be the difference this time around and enable it to look up towards record highs, only a few percent above where it currently finds itself.
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