Russia could be excluded from OPEC deal, four experts discuss impact

  • According to The Wall Street Journal, Russia could be excluded from the OPEC production quota agreement after it misses its target.
  • OPEC members discussed the idea as Western sanctions and EU bans limit Russian oil production.
  • If Russia is cut by OPEC, analysts expect the following to happen to global oil supply.

Some members of the Organization of the Petroleum Exporting Countries (OPEC) are considering removing Russia from the group of oil production agreements, The Wall Street Journal reports Tuesday.

Experts say the move could have a major impact on oil prices and global energy markets.

Russia’s economy and oil production have been hit hard since its invasion of Ukraine in late February, leading to Western sanctions and bans on imports of its energy.Its oil production fell 7.5% through mid-April, and the Kremlin said it could Down 17% this yearaccording to the reports seen Reuters.

OPEC members are considering whether to withdraw Russia from the group’s pact to gradually increase oil production after Russia failed to meet its target.

According to the Wall Street Journal, an OPEC representative said: “It doesn’t make sense for them to comply with quotas.”

Russia is not part of the 13-strong OPEC group of major oil producers, but leads the 10 countries it has allied with in the broader OPEC+. A larger group is scheduled to meet on Thursday to approve a plan to boost oil production to 432,000 barrels a day. Its goal is to stabilize global oil supplies and restore them to pre-pandemic levels.

If Russia is excluded from the deal group, countries such as Saudi Arabia and the United Arab Emirates could step in to increase supply.This could help bring down oil prices, which have been rising and have two-month high.

Here’s what analysts think about the possibility of OPEC+, Russia being excluded and what that could mean for the broader oil market:

OANDA Senior Market Analyst Jeffrey Halley: “In fact, only Saudi Arabia, the UAE, and perhaps Iraq will be able to ramp up production quickly, as the rest of the group cannot meet their current quotas, let alone larger reallocated ones. If Russia agrees to this course of action, it will put pressure on oil prices, rebalancing supply and demand, but not enough to push Brent back to $100 a barrel. If this result is imposed on Russia, which disagrees with it, it would mean a major rupture in OPEC+ unity. This would be an even more bearish development for oil prices. I believe Russia has agreed to the lesson, or the story is incorrect. Any other outcome would appear to mean OPEC’s own humiliation. ”

ING strategists Warren Patterson and Wenyu Yao: “Given that many countries have already imposed sanctions on Russian oil, it will be a challenge for Russia to increase production and meet output targets set out in the OPEC+ agreement in the coming months. That could open the door for other OPEC+ members to increase production more aggressively. But in reality, given that most members have been missing their output targets for months, it may be difficult for the group as a whole to increase output more aggressively. “

Edward Bell, Senior Director, Market Economics, Emirates NBD: “Market conditions continue to call for additional supply, but as long as OPEC+ continues to focus on ‘fundamentals’, we expect oil prices to continue to be priced fairly tight, meaning high and volatile prices will persist,” According to S&P Global.

Daniel McCarthyStrategist at Daily FX: “This could open the way for other member states to increase production, which would be welcomed by the US and Europe. The additional production capacity of these other countries remains clouded over. “