Major oil producers are expected to stick to their current output strategy or even slash production further when they meet on Sunday in the face of falling prices, a potential Russian oil price cap and an embargo on Russian crude shipments.
At their last ministerial session in October, the 13-nation Organization of the Petroleum Exporting Countries headed by Riyadh and its 10 allies led by Moscow, collectively known as the OPEC, agreed to reduce output by 2 million barrels per day (bpd) from November.
The OPEC reduction amounted to the biggest cut since the height of the COVID-19 pandemic in 2020.
Amid fears of economic slowdown, Sunday's cartel meeting via videoconference convenes ahead of the EU enforcing an embargo on Russian crude shipments from Monday.
G-7 countries, the EU, and Australia had also appeared close to agreeing on a $60 per barrel price cap on Russian oil Thursday.
The alliance should vote for a "rollover of the previous decision" to cut 2 million bpd, an Iranian source told Agence France-Presse (AFP) on Thursday, arguing that the market was "very uncertain" in light of imminent European sanctions.
China worries
"Odds are that the group will reassert its commitment to its latest output cuts," says PVM Energy analyst Stephen Brennock, adding he would not rule out that they "may even potentially announce fresh cuts" to bolster prices.
Since the October meeting, oil prices have been plummeting to their level of early 2022, far from the peaks above $130 a barrel in March after the start of Russia's invasion of Ukraine.
Two global crude benchmarks were hovering around $85 a barrel on Thursday.
Covid-related restrictions in China have raised fears about energy demand from the world's largest importer of crude oil.
Beijing defused concerns, however, by signaling a possible easing of the strict zero-Covid policy, after nationwide protests against health restrictions broke out.
Soaring inflation in Europe and across the Atlantic has also fuelled fears of a recession.
Russian 'leverage'
Beyond the economic gloom, the big unknown in the oil equation currently is Russian oil, as Western nations seek to decouple themselves from Moscow's energy supplies as fast as possible.
The EU has decided to ban member states from buying Russian oil exported by sea from Dec. 5, "putting at risk over 2 million bpd," according to estimates by ANZ analysts.
Investors are also scrutinizing a European Commission-proposed $60 per barrel price cap on Russian crude, which is designed to reinforce the effectiveness of the EU embargo.
The EU was already in agreement with Washington on the need to cap the price Western clients pay for Russia's oil, to prevent Moscow from profiting from price rises triggered by its war on Ukraine.
Last week, Russian President Vladimir Putin warned that any attempt by the West to cap the price of Russian oil would have "grave consequences" for world markets.
Russia "has several options to circumvent such a cap," said UniCredit economist Edoardo Campanella, adding that "OPEC might feel compelled to adopt a more aggressive stance" by cutting or threatening to cut production even further.
"Russia might also retaliate by leveraging its influence within OPEC to push for more production cuts down the road, thus exacerbating the global energy crisis," Campanella said.