OPEC+ leaves output unchanged ahead of Russia sanctions, price cap  

4 Dec 2022

Quantum Commodity Intelligence - The OPEC+ producer alliance said Sunday it will not make any changes to output policy for now, maintaining the announced production cut of 2 million bpd which came into effect in November.

The outcome was largely expected heading into the meeting, following two weeks of intense speculation amid various media briefings from delegates ranging from a further output cut to even an increase in quotas.

The announcement came after the 23-nation group's Joint Ministerial Monitoring Committee (JMMC) recommended no change to current production levels. 

After Brent tumbled to an 11-month low of $80.61/b in late November, speculation had moved towards a further cut, but ultimately analysts said OPEC+ opted for a wait-and-see stance as the EU sanctions on Russian crude are implemented in tandem with the $60/b G7 price cap.   

ICE Brent futures for Feb23 settled Friday at $85.57/b, but the East-of-Suez Dubai benchmark, which is used in pricing most Middle East crude, is currently trading at around $5.50/b under Brent.

Also of concern to producers, the Dubai market structure has come under strong downward pressure in recent weeks, with the key M1/M3 spread (Feb23/Apr23) on Friday near a yearly low of around $1/b, according to Quantum data.

In turn, the crunch in market structure will lead to a sharp contraction in OSP differentials against the underlying benchmark, with Saudi Aramco expected to publish prices for January-loading crude on Monday.  

The 10 members of the core OPEC group with quotas pumped 29.01 million bpd in November, down 710,000 bpd from October, according to a Reuters survey.

Highlights of key OPEC+ meetings

March 2020

OPEC+ group fails to reach an agreement on cutting supplies in the face of the COVID-19 pandemic, as both Russia and Saudi increase production, triggering a sharp price drop.

April 2020

OPEC+ agrees to a record supply cut of 9.7 million bpd, oil prices rebound.

June 2020

Producers agree to extend the first phase of the 9.7 million bpd cuts for another month but announce plans for reduced cuts to 7.7 million bpd starting in August.

December 2020

Members announce a small 500,000 bpd increase for January 2021. Agree to hold meetings on a more regular basis in 2021 to review market conditions.

January 2021

Agrees to keep output steady except for small increases in Russia and Kazakhstan. Saudi Arabia announces a voluntary 1 million bpd cut for February and March.

April 2021

OPEC+ agrees to gradually increase production by 1 million bpd May-July, while Saudi to restore 1 million bpd of voluntary cuts.

June 2021

OPEC+ meeting lasts under one hour, ends with an agreement to stick with the existing plan, but no discussion on output changes for August and beyond.

July 2021

OPEC+ agrees to increase output by 400,000 bpd each month from August to December, adding 2 million bpd in total, but with the flexibility to review the proposed hikes.

December 2021

Agrees to a further 400,000 bpd hike in January after pressure from consumer countries, despite Omicron Covid surge and Q1 oversupply fears.

Late-March 2022

May quotas set to rise by a combined 432,000 bpd, linked to higher baseline levels. Shrugs off pressure to ramp up production after Russia's invasion of Ukraine.

June 2022

OPEC+ agrees to increase output by 648,000 bpd in both July and August.

August 2022

Modest increase of 100,000 bpd announced for September.

September 2022

Reverses September increase, returns to August quotas.

October 2022

OPEC+ announces a headline cut of 2 million bpd from November, which analysts say will result in around 1 million bpd of actual cuts.

December 2022

OPEC+ agrees to a rollover, taking a wait-and-see stance as EU sanctions and the G7 price cap on Russian crude are implemented from 5 Dec.