(MENAFN) Despite a banking crisis that sent crude prices plunging, the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, are likely to stick to their deal on output cuts of 2 million barrels per day until the end of the year, according to three delegates from the producer group who spoke to Reuters. The banking crisis resulted in the collapse of two US lenders and the rescue of Credit Suisse by Switzerland's biggest bank UBS, causing oil prices to hit 15-month lows. Brent crude was trading around $75 a barrel on Wednesday morning.
Last October, OPEC+ agreed to steep output cuts of 2 million bpd from November until the end of 2023, despite major consumers calling for increases in production. This decision helped push Brent close to $100 a barrel, but prices have come under pressure since then as rising interest rates to combat high inflation threaten to stymie oil demand growth.
Despite falling oil prices being a problem for most of the group's members due to their economies' heavy reliance on oil revenue, OPEC+ is still expected to stick to its output cut deal. Russian Deputy Prime Minister Alexander Novak confirmed on Tuesday that Moscow would continue with its 500,000-bpd production cut announced last month, lasting until the end of June.
The decision to maintain output cuts is likely due to concerns about the impact of high inflation on oil demand growth. While the banking crisis may have caused a temporary dip in oil prices, the longer-term threat to demand growth posed by inflation is a more significant concern for OPEC+. Falling oil prices could also lead to budget shortfalls for member countries, making output cuts a necessary measure to maintain revenue streams.
In conclusion, OPEC+ is likely to maintain its output cuts of 2 million bpd until the end of the year, despite the recent banking crisis and falling oil prices. The decision to stick to the output cut deal is likely driven by concerns about the impact of high inflation on oil demand growth, as well as the potential budget shortfalls that could result from falling oil prices. While the banking crisis may have caused a temporary dip in oil prices, the longer-term threat posed by inflation is a more significant concern for OPEC+.
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