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OPEC+ likely to maintain oil output at meeting, in gesture to US

While the OPEC+ group is expected to maintain oil production at its virtual meeting set for Feb. 1, global demand for oil is estimated to reach a record high in 2023.
Saudi Arabia's Minister of Energy Abdulaziz bin Salman looks on during a press conference after the 45th Joint Ministerial Monitoring Committee and the 33rd OPEC and non-OPEC Ministerial Meeting in Vienna, Austria, on October 5, 2022. (Photo by VLADIMIR SIMICEK/AFP via Getty Images)

Oil output is expected to stay the same after Wednesday’s planned meeting of OPEC+ leaders, according to industry experts who say it is partially to appease the United States. 

A host of factors are contributing to this prediction ahead of the decision-making at tomorrow's meeting of the 13-member Organization of the Petroleum Exporting Countries (OPEC) plus its allies, whose market influence is strong with exports accounting for about 60% of the global petroleum trade, according to the World Bank. 

On Monday, the group’s de-facto leader, Saudi Arabia’s Crown Prince Mohammed bin Salman, held a phone call with Russian leader Vladimir Putin to maintain price market stability, said the Kremlin in a statement. 

Amro Zakaria Abdu, an independent energy and financial service industry strategist, believes that given OPEC’s price target of $80 to $90 per barrel for 2023 has already been met, the group doesn't want to invite unwanted attention, and the United States will be watching. 

“They don’t want to antagonize the US,” he said about the group that already cut its production by 2 million barrels per day (2% of world demand) starting in November 2022, leading US President Joe Biden to vow consequences for the October decision. 

“It’s not the time that any of the emerging market members or allies want to upset the US as they need the US’s blessing, especially this year, in negotiations with multinational financial institutions such as the World Bank and the International Monetary Fund (IMF) as they negotiate to extend loans or ask for forbearance on payments,” he told Al-Monitor. 

In addition, the global economy is still not out of the woods after the COVID-19 pandemic and the impact of economic sanctions on Russia, said Abdu, and the OPEC+ group wants to avoid a recession. 

Another main reason, he added, is that the United States is already taking a significant market share as the No. 1 oil producer in 2022, according to Dallas oil & gas exploration group DW Energy Group. 

In the past year, the political and economic changes in oil production have contributed to a more polarized global climate and shifted relationships. 

Western sanctions hindered Russian exports in 2022, yet Russia has continued to sell oil to China, the world’s largest importer, in continuation of the no-limit partnership established between them before the Ukraine War, according to Reuters. 

Since China lifted COVID restrictions amid Lunar New Year travel in January, its oil demand is expected to contribute to nearly half the global oil demand gain this year, according to the Oil Market Report - January 2023 by the International Energy Agency (IEA). 

In 2023, global oil demand is set to rise 1.9 million barrels per day and reach a record 101.7 million barrels a day, highlighted the report. The United States ranks as the world’s leading source of supply growth, followed by Canada, Brazil and Guyana. 

Also shifting is the mutually beneficial relationship between the United States and Saudi Arabia, which visibly soured after the October decision by OPEC+ to reduce oil production as regional countries like Saudi Arabia look east for partnerships. 

Eckart Woertz, director of the GIGA Institute for Middle East Studies, said while countries can move to cooperate more with China or Russia, the United States cannot be replaced at this stage. 

“When it comes to defense and weapons, Gulf countries are banking highly on the US,” he said — especially in the future, as Iran is on its way to becoming a nuclear threshold state. 

“I think people in the US and in the West will remember these moves, so there might be some political price paid for it,” said Woertz, but it won’t happen now or be anything dramatic. 

World dynamics are changing. The West has to realize that it’s not the only kid on the block anymore, said the institute director, and some countries in the Global South may face consequences for pulling away.

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