The OPEC+ Joint Ministerial Monitoring Committee (JMMC) meeting started at 2 pm Vienna time on Wednesday (9 pm Beijing time). OPEC+ representatives subsequently stated that the OPEC+ committee did not recommend any adjustments to production.
Delegates said OPEC+ wanted to remain conservative in its approach until there were clearer signals that the market needed more crude supplies. OPEC+ decided to maintain the status quo because it hopes to have more time to evaluate China’s consumption data and the impact of EU sanctions on Russia.
OPEC+ decided in December last year to maintain a production cut of 2 million barrels per day, which was decided in October. This decision was made before the Western oil export price ceiling to Russia was about to take effect, and oil-producing countries expressed uncertainty about the trend of crude oil prices.
OPEC+ does not plan to review its production targets before the June meeting, but the JMMC could call for a full OPEC+ meeting if necessary. The JMMC will hold its next meeting on April 3.
In its monthly report released in mid-January, OPEC predicted that supply and demand in the crude oil market would remain balanced in the first quarter of 2023, with OPEC needing to provide an average of 28.85 million barrels per day of oil, about 120,000 barrels less than the previous month’s forecast. Relevant forecasts further confirmed the decision to reduce production made at the end of last year, helping to support international oil prices of nearly $85 per barrel.
In the above-mentioned monthly report, OPEC also predicted that China’s oil demand will increase by 510,000 barrels per day this year. However, OPEC Secretary-General Haitham Al-Ghais previously warned that the economic slowdown and persistent inflation in advanced economies have cast a shadow on the outlook.
OPEC’s cautious outlook contrasts with the views of many analysts and some investors, who are betting that China’s reopening could lead to a rebound in oil demand, pushing up prices this year. For example, “commodity bulls are dead” Goldman Sachs believes that as global inflation cools down, major central banks slow down the pace of interest rate hikes, and China’s economy recovers faster than expected, oil prices are expected to rise to US$110 in the third quarter.
On the same day, Russian Deputy Prime Minister Novak stated that OPEC+ agreed that the market situation was stable and oil prices were acceptable. Russia continues to pay attention to the many uncertainties in the oil market. Despite sanctions, Russian oil production and exports are stable. Now facing sanctions, Russia has found alternative oil buyers.
Currently, Western sanctions on Russian fossil fuels are accelerating changes in global energy flows, most notably in India. Since November last year, India has become the largest buyer of Russian crude oil, filling the huge gap left by European buyers who have avoided it. After Russian oil imports hit an all-time high, Indian refiners are showing increased interest and say they may get more cheap crude from February, as the EU’s embargo on Russian seaborne refined petroleum products comes into effect, which may affect major OPEC+ producers. This puts pressure on the country’s refining rates.
At the same time, major Middle East energy exporters such as Saudi Arabia and the United Arab Emirates are shifting their focus from the traditional Asian market to the higher premium European market.
On Wednesday, oil prices fell more than 3% intraday, mainly driven by crude oil inventory data from the U.S. Energy Information Administration (EIA). EIA data shows that in the week of January 27, U.S. crude oil inventories increased to a new high since June 2021. Crude oil inventories in Cushing, Oklahoma, reached their highest level since July 2021. U.S. oil imports hit a new weekly high since July 2022.
The specific data for the week of January 27th are as follows:
U.S. EIA crude oil inventories +4.14 million barrels, expected -195,570 barrels, previous value +533,000 barrels.
U.S. EIA Cushing crude oil inventories +2.315 million barrels, compared with the previous value of +4.267 million barrels.
U.S. EIA gasoline inventories +2.576 million barrels, a week-on-week increase of 1.11%, expected +1.12029 million barrels, the previous value +1.763 million barrels.
U.S. EIA distillate inventories +2.32 million barrels, expected -1.31943 million barrels, previous value -507,000 barrels.
The U.S. EIA refining capacity utilization rate was -0.40%, expected to be +0.64%, and the previous value was +0.80%.
Bob Yawger, head of U.S. futures at Mizuho Securities, said that the EIA data reflects the current sluggish demand and that there have been some very negative developments in the crude oil market.
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