OPEC+ seen sticking to plan despite price shock from Ukraine crisis

OPEC+ will probably stick to its plan of only gradually increasing oil production when it meets this week, according to several delegates, even after Russia’s invasion of Ukraine sent prices surging.

Oil’s jump last week to $100 a barrel for the first time since 2014 was triggered mostly by geopolitics and did not reflect an imbalance between supply and demand, the delegates said. The group should continue adding 400,000 barrels a day of crude to the market each month, they said.

The Organization of Petroleum Exporting Countries and its partners – a 23-nation alliance known as OPEC+ and which includes Russia – meet on Wednesday to decide production targets for April.

OPEC members have faced pressure in recent months from major importers including the US to pump faster and help lower the cost of fuel for motorists. American gasoline has surged to an average of nearly $4 a gallon, heaping pressure on President Joe Biden ahead of mid-term elections in November.

Saudi Arabia, the world’s biggest oil exporter is saying it’s committed to the OPEC+ agreement. It is unlikely to decide on a unilateral raise in production beyond its quota, the delegates said. Such a move could create a rift with Russia and possibly cause the OPEC+ alliance to unravel.

The kingdom and neighbouring UAE are among the few OPEC members with significant spare output capacity. Most of the others are struggling to reach their existing quotas. This month, the International Agency Energy, which advises rich countries, said OPEC+ was pumping almost 1 million barrels a day below its target.

Brent crude spiked to more than $105 a barrel on Thursday after Russia begun its attack on Ukraine. It later pared most of its gains after Biden said the US was working with major consuming nations to coordinate a release of strategic petroleum reserves, while continuing to spare Russian energy supplies from sanctions.

Brent ended the week up 4.7 per cent at $97.93 a barrel. West Texas Intermediate, the main US benchmark, gained 0.6 per cent to $91.59. The high volatility underscored that fear and speculation were driving prices rather than underlying fundamentals, according to the OPEC delegates.