FRANKFURT, Germany –
The Saudi-led OPEC oil group and allied producers including Russia have not changed their goal of shipping oil to the global economy amid uncertainty over the impact of new sanctions. for Russia could take a significant amount of oil off the market.
The decision at Sunday’s meeting of oil ministers came a day before the expected start of two measures aimed at hitting Russia’s oil income in response to its invasion of Ukraine. These are: The European Union boycotts most of Russia’s oil and the $60/barrel price ceiling on Russian exports imposed by the EU and the Group of Seven democracies.
It remains unclear how much of Russia’s oil the two sanctions could remove from the global market, which would tighten supply and push up prices. The world’s No. 2 oil producer has been able to reroute most, but not all, of its previous European shipments to customers in India, China and Turkey.
The impact of the price cap also increases as Russia says it may simply stop shipping to countries that comply with the limit. But analysts say the country will also likely seek to evade limits on some shipments.
Oil, on the other hand, has been trading at lower prices due to concerns that the coronavirus outbreak and China’s strict COVID restrictions will reduce fuel demand in one of the world’s major economies. gender. Fears of an economic slowdown in the US and Europe also increase the likelihood that demand for gasoline and other fuels made from crude oil will decline.
That uncertainty is the reason the OPEC+ alliance offered in October to cut output by 2 million barrels per day starting in November, a cut that remains in effect. Analysts say that has taken less than the entire amount off the market as OPEC+ members have been unable to meet their full production quotas.
An OPEC+ statement on Sunday pushed back against criticism of that October decision due to the recent drop in oil prices, saying the cuts had been “recognized by market participants in retrospect as action”. necessary and correct to stabilize the global oil market price.”
The White House, which has pushed for more oil supplies to reduce gasoline costs for American drivers, at the time called the cuts “short-sighted” and said the alliance was “aligned with Russia.” .
With the global economy slowing, oil prices have fallen since their summer highs, with international benchmark Brent closing Friday at $85.42 a barrel, down from $98 a month ago. . That has brought down gas prices for motorists around the world.
The average gas price for American drivers in recent days has dropped to $3.41 a gallon, according to the AAA driver’s club federation.
While the US, Europe and other allies seek to punish Russia for the war in Ukraine, they also want to prevent a sudden loss of Russian crude that could send oil and gasoline prices back up.
That is why the G-7 price ceiling allows shipping and insurance companies to ship Russian oil to non-Western countries at or below that threshold. Most of the global tanker fleet is insured by insurers in the G-7 or the EU.
Russia will likely try to evade the cap by organizing its own insurance and using tanker fleets off the world’s shady books, as Iran and Venezuela have done, analysts say. that would be expensive and cumbersome, analysts said.
The $60 a barrel cap is close to current Russian oil prices, meaning Moscow can continue to sell while rejecting the cap in principle. Oil use also drops in the winter, in part because fewer people drive.
“If Russia ends up extracting about a million more barrels of oil a day, the world will be short of oil and there will need to be some sort of offset, whether that be,” said Jacques Rousseau, chief executive officer at the company. Is it from OPEC or not? Clearview Energy Partners. “That will be the key factor – finding out how much Russian oil actually leaves the market.”
The OPEC+ statement set its next meeting for June 4 but said the alliance could meet at any time to address market developments.
AP business writer Cathy Bussewitz contributed from New York.