- Russia could be excluded from the OPEC mining quota agreement after failing to meet WSJ targets.
- OPEC members discussed the idea as Western sanctions and an EU ban limit oil production in Russia.
- Here’s what analysts expect could happen to global oil supplies if Russia were excluded from OPEC.
Some members of the Organization of the Petroleum Exporting Countries (OPEC) are considering excluding Russia from the oil agreement, The Wall Street Journal reported on Tuesday.
Experts say the move could have a major impact on the price of oil and the global energy market.
Russia’s economy and oil production have suffered since its invasion of Ukraine in late February, which led to Western sanctions and a ban on its energy imports. Its oil production fell by 7.5% in mid-April, and the Kremlin said it could fall by as much as 17% this year, according to a Reuters report.
OPEC members are considering whether Russia will withdraw from the agreement to gradually increase oil production after the country has not reached its target.
“It doesn’t make sense to force them to stick to quotas,” one OPEC delegate said, according to the WSJ.
Russia is not part of the 13-member group of major OPEC oil producers, but leads the 10 associated countries in the broader OPEC +. The larger group is due to meet on Thursday to approve a plan to increase oil production to 432,000 barrels a day. Its goal is to stabilize global oil reserves and return them to pre-pandemic levels.
If Russia is excluded from the agreement, Saudi Arabia and the United Arab Emirates could intervene and replenish more supplies. This could help reduce oil prices, which are rising and have recently traded around two-month highs.
Here’s what analysts say about OPEC +, a chance to exclude Russia and what it could mean for the wider oil market:
Jeffrey Halley, OANDA’s Chief Market Analyst: “In reality, only Saudi Arabia, the United Arab Emirates and perhaps Iraq can increase production quickly because the rest of the group cannot meet their current quotas, let alone larger redistributed ones. If Russia agreed to this approach, it would burden oil prices, balance supply and demand, but not enough to send Brent oil back over $ 100 a barrel. If this result was imposed on Russia, which did not agree with it, it means a big rift in OPEC + unity. That would be a much more bearish development of oil prices. I believe that Russia has agreed to this course or that the story is incorrect. Any other result seems to mean that OPEC is shooting itself in the leg. ”
Warren Patterson and Wenyu Yao, strategists of ING: “With a number of countries imposing sanctions on Russian oil, it will be a challenge for Russia to increase production in the coming months and achieve the OPEC + production target. This potentially opens the door to other OPEC + members to increase production more aggressively. In reality, however, given that most members have not been able to consistently achieve their output targets for several months, the group as a whole is likely to struggle to increase production more aggressively. “
Edward Bell, Chief Market Economy Officer at Emirates NBD: “Market conditions continue to call for more deliveries, but if OPEC + focuses on ‘basics’, we expect oil prices to remain highly tight, which means high and volatile prices will persist,” says S&P Global.
Daniel McCarthy, ptrégista at Daily FX: “This could potentially pave the way for other member states to increase production, which the US and Europe would welcome. Capacity for further production from these other countries remains cloudy. “
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