Opec+ would be “wise” to wait until there is more clarity on the outlook for the oil market before amending production targets, according to new Opec president Gabriel Mbaga Obiang Lima.
At its last ministerial meeting in December, Opec+ opted to roll over the nominal 2mn b/d cut to crude output targets agreed at the previous meeting in October, citing similar concerns over an uncertain market outlook. The group has since said that both the October and December decisions helped balance the oil market.
Although ministers are not due to meet again until 4 June, the group’s Joint Ministerial Monitoring Committee (JMMC) is scheduled to convene on 1 February to discuss the market and evaluate whether any change to production policy is needed. Obiang Lima said the group will be watching developments going into that meeting, but he urged a cautious approach, particularly in light of fresh uncertainty around the pace of China’s oil demand recovery following Beijing’s decision to abruptly end its zero-Covid policy last month.
Chinese demand and the fallout from the war in Ukraine are “clearly the two key issues that everyone is monitoring most closely”, but the prospect of a widespread recession is also on Opec’s radar, Obiang Lima said. “We are going into 2023 with a lot of countries going into recession,” he said. “Countries will need to re-evaluate their budgets and re-evaluate their economies.”
UK bank Barclays said in its recently issued first-quarter outlook that advanced economies, led by the euro area and the UK, “are heading into a recession” and that the US economy is “also likely to contract”. Obiang Lima acknowledged that high inflation and an economic slowdown in advanced economies could keep a lid on oil demand in the short term but said he expects a strong rebound in consumption towards the end of this year and into 2024. “Everyone will want to avoid going into recession, and those that do go into recession will want to make sure it is for the shortest time possible,” he said.
Obiang Lima is oil minister of Opec member Equatorial Guinea. He succeeded Congo’s Bruno Jean-Richard Itoua as Opec president on 1 January.
