— This is the script of CNBC's financial news report for China's CCTV on November 30, 2022.
International energy markets will witness several important events in the coming days. First of all, in early December, the U.S. will release another 15 million barrels of crude oil from the Strategic Petroleum Reserve to the market, the last batch of the 180 million barrel reserve oil release plan, announced by President Biden this spring.
In recent months, the White House has struggled to reduce energy prices and release unprecedented volumes of reserve oil, resulting in a current U.S. oil reserve stock of only half of its capacity.
Second, OPEC+, a group of OPEC and non-OPEC producers, including Russia, will meet on December 4 to assess the current international energy supply and demand relationship.
An OPEC representative told the Wall Street Journal last week that OPEC+ was discussing increasing production by 500,000 barrels per day. The oil minister of Saudi Arabia then denied the rumors, saying that the current plan to reduce production by 2 million barrels would continue until the end of 2023. In addition, OPEC+ is prepared to intervene in the market if further production cuts are necessary to maintain a balance between supply and demand.
According to Jeff Currie, global head of commodities research at Goldman Sachs, producers will need to discuss whether to accommodate further weakening demand in China.
The meeting will be held online rather than offline. As a result of this change, some market analysts predict that OPEC+ will not make an immediate decision on adjusting production during this meeting. It is because the EU will impose sanctions on Russian oil on the 2nd day of the OPEC+ meeting, December 5th, including a ban on shipping, financing, and insuring Russian oil outside the EU. An important factor affecting the global oil market remains to be determined. Currently, the EU is divided over what level to set for the price cap for Russian oil.
Countries such as Poland and Lithuania are demanding the lowest possible price, arguing that a truly punitive price would be approximately $20 per barrel, which is the cost of producing one barrel of Russian crude oil.
Meanwhile, Greece and other countries would like the price cap to be set as high as possible. Currently, the G7 proposes a price range between $65 and $70 per barrel. This price is very close to the current market price at which Russia sells crude oil. According to Helima Croft, head of global commodity strategy at RBC Capital Markets, with the current pricing being discussed, this appears to be more of an effort to reduce inflation than to reduce Russian revenue.
Vivek Dhar of CBA
"What we're seeing very clearly is that the oil price cap is just going to be non-effective part of the policy. and that's something that was certainly unexpected before the price cap discussions were taking place."