The Opec+ grouping has agreed to maintain its moderate drive to ease production by 432,000 barrels per day in June, ignoring calls from Western nations for higher output and despite concerns that new Russian sanctions could curtain its ability to meet its output targets.
Oil prices continued to trade higher on Friday, as the European Union’s recently proposed phased embargo on Russian oil weighed down heavily on supply fundamentals.
Spot Brent crude traded at almost $111.5 per barrel on Friday morning, registering a marginal price increase, following the decision by the Opec+ group, which includes Russia, to stick to its previously agreed output levels.
Opec said on Thursday that “continuing oil market fundamentals and the consensus on the outlook pointed to a balanced market”.
The group noted that “the continuing effects of geopolitical factors and issues related to the ongoing pandemic” are also impacting the oil markets.
Calls for higher output
The US and other Western nations have raised several concerns about Opec+ policy to restrict production, blaming the group for record-high oil prices.
The group also argued that China’s coronavirus lockdowns threatened the outlook for oil demand in the near term.
Opec Secretary General Mohammad Barkindo said earlier this week that it was not possible for other producers to replace Russian exports of more than 7 million bpd, as such spare capacity does not increase.
In March, crude prices hit their highest since 2008 at more than $139 per barrel after Russia’s invasion of Ukraine exacerbated supply concerns that were already fuelling a rally.
This week’s Opec+ meeting followed the EU’s proposal for a phased embargo on Russian oil earlier this week, in its toughest measures yet over the Ukraine war, which Russia describes as a “special military operation”.
Meanwhile, a US Senate committee passed a bill on Thursday that could expose the Opec+ nations to lawsuits for collusion in boosting crude oil prices, Reuters reported.
The No Oil Producing or Exporting Cartels (NOPEC) bill sponsored by senators, including Republican Chuck Grassley and Democrat Amy Klobuchar.
White House spokesperson Jen Psaki said US President Joe Biden’s administration has concerns about the “potential implications and unintended consequences” of the legislation, particularly amid the Ukraine crisis, the report claimed.
NOPEC could change US antitrust law to revoke the sovereign immunity that has long protected Opec and its national oil companies from lawsuits.
However, the bill must be passed by the full Senate and House of Representatives and be signed by Biden to become law.
Sustained higher oil prices are expected to lead to increased exploration and development efforts in the upstream sector, with more investment decisions likely later this year for complex offshore and deep-water developments, project watchers said.
Offshore rig dayrates have started tightening and leading international oil companies have ramped up exploration efforts, after record earnings due to higher oil prices.
European supermajor Shell this week posted its biggest-ever profit for a single quarter with adjusted earnings of $9.1 billion in the first three months of the year, compared with $3.2 billion in the first quarter and $6.4 billion in the fourth quarter of 2021.