According to OPEC+, the fall in oil prices is due to financial fears and not to an imbalance between supply and demand. Four OPEC+ delegates told Reuters that the organization expects the market to stabilize. Crude fell to a 15-month low on Wednesday, with Brent crude below $72 a barrel, on concerns about the contagion of a banking crisis. However, crude stabilized on Thursday after Credit Suisse received a financial lifeline from Swiss regulators.
A “purely financial” drop in oil prices according to OPEC+.
OPEC+ delegates said the price drop is “purely financial and has nothing to do with oil demand and supply”. They also stated that the organization will wait for the situation to “normalize soon”. Three other delegates from the OPEC+ group made similar remarks.
The delegates’ comments will dampen any speculation that OPEC+ is considering new measures to support the market. The next political meeting of the group will not take place until June, but an advisory group of key ministers will meet on April 3.
Despite falling oil prices, OPEC+ sticks to its targets
Last November, with prices weakening, OPEC+ cut its production target by 2 million bpd – the largest reduction since the early days of the COVID-19 pandemic in 2020. The same reduction applies to all of 2023. The Algerian and Kuwaiti ministers welcomed the decision this week and the Saudi energy minister told Energy Intelligence that OPEC+ would stick to the reduced target until the end of the year.
OPEC’s latest monthly oil market report, released on Tuesday, was also cited by one of the delegates, who said the report indicated a good balance between supply and demand. Another of the sources said that OPEC+ is focusing on market fundamentals.
In summary, OPEC+ believes that the fall in oil prices is not due to a supply-demand imbalance, but to financial fears. The organization will wait for the situation to normalize soon and is not planning any new measures to support the market at this time. OPEC+ is sticking to its production target of 2 million bpd until the end of the year.
