Oil markets could face more volatility soon as there’s a “significant chance” of OPEC+ slashing its crude production quota again, despite the looming European Union ban on Russian oil, according to RBC commodities chief Helima Croft.
“It’s going to be an incredible week for the oil market,” she told CNBC, noting that OPEC will meet on Sunday and the EU’s embargo on seaborne imports of Russian oil takes effect on Monday.
Another production cut could spell trouble for oil prices, which have already been under pressure this year as supply shortages grip the oil market. That’s expected to be exacerbated by the EU ban on Russian oil, which could potentially take millions of barrels off the spot market, Croft said – unless EU nations can agree on a cap that would keep Russian oil flowing.
“I still think it’s up for grabs, but there’s certainly a significant chance they do another cut,” she said, adding that there was “no expectation” for the cartel to increase production.
But European leaders are still scrambling to agree on the price cap level, and oil markets are were rattled over the weekend on protests in China, leading to a steep sell off in crude prices.
That led OPEC+ on Monday to float another cut, which could be announced at the cartel’s meeting on Sunday. Last month, the oil group slashed its production quota by 2 million barrels a day starting November.
Croft said if Brent crude hits $70 a barrel, OPEC would likely issue another major cut, though leaders would likely factor in whether the Russia price cap is able to roll out on Monday as planned, or if the market experiences a disruption in oil supplies. “There is so much uncertainty. They have to factor in what happens with China, but also what happens with Russian production,” she warned.
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