Signaling US, OPEC+ agrees to keep oil production unchanged

Saudi Arabia, Russia and other major oil producers in the OPEC+ alliance agreed Wednesday to maintain their current level of oil output, in a move that will preserve the status-quo and please the Joe Biden administration. 

What happened: The Organization of the Petroleum Exporting Countries (OPEC) met on Wednesday with another group of oil producers including Russia, Oman, Sudan, Azerbaijan and six others. Together, these OPEC and non-OPEC members are known as OPEC+. 

Bloomberg, Energy Intelligence and other outlets reported that OPEC+ decided at the meeting to maintain their current production level. 

OPEC+ instituted a cut of two million barrels per day back in November, but then left production unchanged at the December meeting. Wednesday’s decision indicates no further changes. 

The price of Brent crude oil fell at around 9:00 am ET close to the time the OPEC+ decision broke from around $85.65 a barrel to roughly $85.15 a barrel and then fell just below $85 before 11:00 am ET, according to market data.

The Brent crude price began the year below $78 a barrel and broke $88 a barrel by late January before declining again. On Tuesday, the price hit a three-week low of around $83.25 a barrel. Brent crude oil is widely considered the benchmark for global oil prices. 

Why it matters: The OPEC+ cut in November amounted to 2% of world demand and prompted US President Joe Biden to threaten consequences for the move. It was the largest cut to production targets since the start of 2020, when the COVID-19 pandemic was starting to take hold. 

Industry experts told Al-Monitor this week that OPEC+ sought to keep oil output unchanged in order to assuage the Biden administration. 

Oil demand could rise in the near future. China lifted COVID-19 restrictions in January and its oil demand is expected to contribute to nearly half the global oil demand gain this year. Global oil demand is set to rise 1.9 million barrels per day and ultimately reach a record 101.7 million barrels a day this year, according to a January report by the International Energy Agency.

Know more: Gerard Kepes wrote for Al-Monitor PRO last month that India and China will play a larger role in the near future in global oil trends and that this could diminish the influence of Saudi Arabia, the United Arab Emirates and Russia.