The OPEC+ Joint Ministerial Monitoring Committee will hold a meeting on Monday and while it’s not likely to shake up the oil market, discussions will highlight the importance of continuing to monitor a market that is plagued with concerns about the U.S. and European banking crisis and a potential economic recession.
The JMMC, which is tasked which ensuring the objectives of the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, and monitors and reviews the oil markets, last met on Feb. 1 with little fanfare.
Since then, however, oil suffered a sharp selloff in mid-March that pulled prices for U.S.
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and global benchmark
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crude to their lowest since December 2021, with banking woes feeding worries about a recession that would weaken energy demand. As concerns surrounding the banking crisis eased, oil prices rebounded last week and look to post a second weekly rise.
“Physical contagion fears” from the banking crisis have seemingly subsided, and strategists at RBC Capital Markets, led by Helima Croft, believe that the JMMC meeting will offer a “swift affirmation” of the Oct. 2 OPEC+ decision to cut production.
The committee may add language to its post-meeting statement to point out that the group “will remain proactive and monitor the situation closely,” the analysts wrote in a note dated Wednesday.
The disruption of 450,000 barrels per day of Kurdish oil exports will also likely “bolster the monitoring committee’s conviction that no downward adjustment [to production] is warranted at this time,” the strategists at RBC Capital Markets said. A legal dispute in Iraq between the Kurdistan Regional Government and the central government in Baghdad led to the disruption of crude transported via pipeline to the Turkish port of Ceyhan.
Even so, the strategists said that if “macro fears come roaring back and oil moves materially lower in a sell everything situation, the OPEC leadership will strongly consider convening an off-cycle ministerial meeting to put in another circuit breaker to halt the market slide.”
The JMMC holds meetings every two months and has the authority to hold additional meetings or request an OPEC and non-OPEC ministerial meeting at any time to address market developments if necessary.
The next OPEC+ ministerial meeting will be held on June 4. OPEC+ last met in December and decided to continue with a 2 million-barrel production cut that began in November.
Monday’s JMMC meeting is “important to monitor,” but the committee is likely to recommend that OPEC+ stick to their current output cut agreement, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.
Still, he points out that the market has seen some disruptions in the Middle East, and Russia announced production will decrease going forward.
Russia announced in February that it would cut its crude production by 500,000 barrels a day in March in retaliation to European price caps and sanctions. New reports earlier this month said that Russia plans to keep its production cuts in place through June.
On Wednesday, Reuters reported that Russian oil production fell by around 300,000 barrels per day in the first three weeks of March, citing two sources familiar with the data.
For now, Matt Smith, lead oil analyst, Americas, at Kpler, said OPEC+ likely remains committed to keeping its production quotas unchanged over the coming month, “ignoring near-term volatility.”
“With refining capacity expanding in a variety of Middle Eastern countries this year, it provides great optics for OPEC+ because countries such as Kuwait, Saudi, Iraq and Oman will be keeping crude barrels off the global market, instead redirecting them to their domestic refineries that are ramping up,” he told MarketWatch.
“This not only encourages the perception that crude is more scarce, but gives the ability to sell refined products into a tight global product market — a double win,” he said.
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