Group Meets Against Backdrop of Uncertain Market

(Bloomberg) — The OPEC+ alliance is meeting to review oil production levels for 2023 as the global market is roiled by uncertainty over Chinese demand and Russian supply.

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While Saudi Arabia and its partners had considered discussing additional output cuts, the 23-nation group is now widely expected to keep supply levels unchanged as it gauges the impact of a hefty 2 million barrel-a-day reduction announced at its last gathering in October.

The coalition has to contend with an especially volatile outlook, as European Union sanctions are about to come into effect on crude exports from OPEC+ member Russia. At the same time, China is tentatively easing the Covid measures that have eroded consumption in the world’s biggest oil importer.

A decision to hold the gathering online — rather than at Organization of Petroleum Exporting Countries’ Vienna headquarters as originally planned — has reinforced expectations that the producers will maintain the status quo. Still, Saudi Energy Minister Prince Abdulaziz bin Salman has a reputation for last-minute surprises.

Key Developments:

The EU agrees to set a $60 price cap level for Russian oil
The cap level is seen as likely to keep Russian oil flowing
Kuwait says oil buyers don’t want to boost imports next year
OPEC’s meeting on Saturday was just administrative
Here’s a look at OPEC+ output last month
Meetings due to start at noon on Sunday

(All times are CET)

Decision Comes Day Before Start of EU Ban on Russian Crude and Price Cap (11:20 am)

OPEC+ is holding its meeting the day before a European Union ban on seaborne crude imports from Russia comes into effect. But don’t expect the group to step in to make up for any crude supply that might be lost as a result of the embargo. Russia remains a key part of the OPEC+ group and the other members won’t take a decision that hurts Moscow’s interests.

If there is any discussion beyond a simple rubber-stamping of the production targets agreed in October, which remain in force until the end of 2023, it is likely to focus on uncertainties around oil demand, with Kuwait warning that it is already seeing reduced requests for next year from some of its customers.

The producers will be far more worried about downside risks to crude prices from weaker demand than they will be about upside risks from any disruption to Russian exports.

Oil Posts Biggest Weekly Gain in a Month as Volatility Spikes (11:00 am)

Oil posted its biggest weekly gain in a month, after a volatile week marked by China loosening Covid restrictions and speculation on OPEC+ output policy.

Brent closed at $85.57 a barrel on Friday. It’s up 10% this year, but down from $123 in June. Since then, fears over a global economic recession have triggered selling among traders.

Volatility at the front of the futures curve jumped above 50% earlier this week, the highest since September. Prices have swung as traders try to anticipate OPEC+’s decision and whether China’s tentative easing of Covid-Zero policies will boost demand in the world’s largest importer of crude.

The gyrations have become too much for many traders to stomach. Open interest for WTI stands at the lowest since 2014 and money managers have slashed bullish bets on both benchmarks for three weeks straight. Analysts say the liquidity crisis will continue as positions continue to be closed out before year end.

Shanghai Eases Covid Curbs (8:00 am)

Shanghai eased some of its Covid restrictions, joining other top-tier Chinese cities as authorities expand a shift toward reopening the economy. Chinese demand is one of the key factors OPEC+ needs to weigh up as it sets policy.

OPEC Committed to Achieving Oil-Price Stability, Says Iraq (Saturday, 5:30 pm)

OPEC is intent on achieving price stability and balancing oil markets, Iraqi Oil Minister Hayyan Abdul Ghani said in a statement.

The group’s members are committed to current output targets that continue until the end of 2023, Abdul Ghani said after joining an OPEC ministerial meeting on administrative matters.

Kuwait Says Oil Buyers Don’t Want to Boost Imports Next Year (Friday, 9:00 pm)

Kuwait’s state energy company said customers are reluctant to increase oil imports next year, signaling that consumption is being suppressed by global economic weakness.

“We’re really nervous about where demand is going over the next few months and the next year, especially if there is a recession,” Sheikh Nawaf Al-Sabah, chief executive officer of Kuwait Petroleum Corp., said to Bloomberg TV late on Friday. “We’re talking to our customers. They’re saying that they either require the same amount of oil, or they’re asking for slightly less next year.”

The OPEC member exports about 2 million barrels a day of crude, most of it to Asian countries such as China, South Korea, Japan and India.

–With assistance from Khalid Al-Ansary, Alix Steel, Guy Johnson and Michael Gunn.