What should OPEC+ consider before the upcoming meeting

Next Wednesday, February 2, a regular meeting of OPEC+ will be held, at which the alliance members will assess the market situation and agree on production targets for March. According to the current terms of the deal, OPEC+ countries should increase oil production by 400 thousand barrels per day in March. It is worth noting that this target level has been maintained since the summer of 2021.

At the same time, OPEC+ needs to take into account several new factors that have a strong impact on the oil market today. 

• Oil prices 

The price of oil has been hovering near multi-year highs of $90 per barrel in recent days. This is not bad, but some OPEC+ participants, including Saudi Arabia, usually try to avoid situations in which high prices begin to lead to a reduction in economic activity and put pressure on sales. The Alliance will have to understand what is behind the current market rally – fundamental factors or the activity of speculators. And if OPEC+ members come to the conclusion that the price increase is spurred by the speculators’ actions, and not by supply and demand, then the current production parameters will most likely be preserved. 

• The conflict between Russia and Ukraine

The situation around Russia and Ukraine continues to cause great concern among traders, as many are confident that the escalation of the conflict will lead to supply disruptions. Experts note that the current high cost of oil is precisely the consequence of this conflict. However, there is an opinion that even in the event of Russia's invasion of Ukraine and the imposition of sanctions against the Russian oil and gas industry, China and Germany will buy oil from Russia.

• Failure to meet production targets

According to current data, OPEC+ countries have not actually fulfilled the current quota of 40.894 million barrels per day. Therefore, the participants of the meeting will face the question of whether it is worth increasing the quotas even more or whether it is better to wait until the target volumes are reached. 

Most likely, OPEC+ will continue to increase production quotas, but only those countries that can do this will increase volumes.