OPEC+ leaders love $100 oil, but they won’t necessarily defend it.

The Organization of the Petroleum Exporting Countries, Russia and other allies, known as OPEC +, pump more than 40% of the world’s 100 million barrels of production per day. The group exerts a powerful influence on world fuel prices through its purchasing policy.

OPEC+ does not explicitly state its preferred price level. Senior officials from Saudi Arabia and Russia have said in recent weeks that the goal of the group’s policy is to ensure that global oil supply matches demand, not to defend a certain price.

“Our goal is simple: to examine the balance between supply and demand for a period of at least a year and more often a year and a half,” a senior OPEC+ source familiar with the file told Reuters .

“There are too many variables beyond human control, such as COVID in 2020 and the financial crisis in 2008, so we must be humble.”

One of the key measures of the balance between supply and demand, however, is price. When demand threatens to exceed supply, prices rise, and vice versa. The statements of the members of the group and the fact that they have increased or decreased the supply gives an idea of ​​what the producers consider a reasonable return for their oil.

Recent signals suggest a preferred price level of around $90,100 a barrel for Brent, the three government sources and analysts told Reuters.

That’s higher than the previously perceived level of around $75 that OPEC+ observers saw as the price the group wanted to see in early 2021.

Oil traded between $100 and $120 for most of the second quarter, alarming governments in many countries that were already facing rampant inflation.

For more than a year, the United States has pushed Saudi Arabia and other producers to pump more to cool rising prices.

But major oil producers, including Saudi Arabia, have made public statements in recent weeks to support prices that had fallen toward $90 amid a weakened outlook for the economy and global demand.

These statements culminated with the symbolic reduction of OPEC + of its oil production target of 100,000 barrels per day (bpd), which many analysts interpreted as a signal that the group defends prices above $ 90. .

The price corridor has increased with the increase in material costs and inflation, another source informed about the Saudi government and another source in the industry said, factors that mean that producers need to generate higher revenues from oil to balance their budgets.

“A $120-130 oil price is risky and Saudi Arabia will prevent it, but $100 will not have a huge impact on the global economy – Saudi Arabia would be comfortable with that price,” said a of the three sources.

While most OPEC+ producers depend on oil revenues and have different oil price requirements to balance their budgets, Saudi Arabia and Russia do not have an official price. Saudi officials haven’t talked openly about a price target or price aspiration in years.


The coffers of the oil nations, including those of Saudi Arabia, have been emptied by the price crash induced by the pandemic of 2020. The high prices help to strengthen their coffers.

In April, the International Monetary Fund projected the price of Saudi Arabia’s oil – the price of oil at which it will break even in its budget – at $79.20 a barrel. The Saudi government does not disclose its supposed oil price.

“More than $100 is a win for the state,” said Karen Young, a senior fellow at the Middle East Institute in Washington. “I think the comfortable level is something over $80, but the fiscal policy is flexible.”

$100 oil is also necessary for companies around the world to maintain healthy levels of investment so that supply keeps up with demand, the source familiar with Saudi government thinking said.


Even after falling to $90 a barrel, oil remains relatively expensive.

Brent only recovered above $90 in February, after trading below that level since 2014.

Russia has different motivations than Saudi Arabia for its price comfort zone. This year, Moscow had to sell its crude at below reference prices to buyers in Asia, as Europe and the United States banned or discouraged imports of Russian oil in response to the war in Ukraine .

Russia wants oil at no less than $100 to offset the discounts, two industry sources familiar with Russian thinking said. Deputy Prime Minister Alexander Novak rejected the idea that there was price collusion.

“We are not talking about the formation of prices, but about the adequacy of the supply on the market, so that on the one hand there is no excess, and on the other hand there is no shortage,” Novak said said this month.

In the past, OPEC has made sporadic attempts to keep prices at a certain level. In 2000, the group established a price range mechanism to keep oil between 22 and 28 dollars. When prices rose above $28 a few years later, the tape was suspended.

Saudi Arabia and OPEC have also favored $100 oil at different times. Saudi Arabia first approved $100 oil in 2012, and in 2018 Saudi officials said in private meetings that oil between $80 and $100 was desirable, according to sources at the time .

Such lofty aspirations have fallen after developments including the US shale oil boom and global oversupply and price collapse made them unrealistic, as did falling prices during the pandemic of COVID.

Today, tight supply is again supporting prices. Shale growth has topped OPEC’s list of concerns and forecasters still expect solid oil demand growth in 2023, despite weaker economic growth and recession fears.

OPEC+ appears to be looking for $90 as a minimum price, said Tamas Varga of oil broker PVM, referring to Brent.

G7 plans for a Russian oil price cap aimed at reducing Moscow’s revenue while maintaining its oil flow could also support prices if Moscow retaliated, he added.

“This implies that the alliance intends to defend the price of $ 90 and comes at a time when the proposal of the Russian oil price could lead to retaliatory measures from Russia, which would also tighten oil balance,” he said.

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