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OPEC has chosen to stick with the current production allocation. Analysts said the decision reflected uncertainty over the direction of the global economy.File photo courtesy of Mohamed Messara/EPA-EFE
February 1 (United Press International) — Reflecting uncertainty over the economic outlook, crude oil prices fell on Wednesday after the OPEC-led group decided to maintain current production levels.
A technical committee of OPEC held a virtual meeting on Wednesday to review production allocations. The group meets regularly to discuss production quotas and has made no recommendations to change the current policy.
All participating countries visit to meet existing quotas. The decision was widely expected after the IMF said the energy crisis triggered by the war in Ukraine was “less severe than initially expected”.
Growth was surprisingly resilient in the third quarter of last year, with a strong labor market, strong private demand and Europe’s better-than-expected adaptation to the energy crisis,” it said.
IMF revision its prediction Global growth is higher, from 2.7% to 2.9%, although the US and EU are expected to account for only 10% of global growth. China and India, two countries still sucking up Russian fuel, should account for about half of global growth this year.
That should ease concerns in Russia, which is largely cut off from Western economies because of the sanctions. Russia is part of a joint committee reviewing production allocations, and while there were few comments from ministers involved in the decision-making process, the decision was seen as a cautious approach to an uncertain economic future.
“It’s fair to say that given the uncertainty over China’s reopening and how the European oil embargo will affect Russian oil production, the path of least resistance is to keep production constant,” analysts at Swiss investment bank UBS told UPI.
Despite the IMF’s upbeat assessment, downside risks to its forecast remain.
“China’s recovery could stall due to a larger-than-expected economic disruption from COVID-19 infections or a sharper-than-expected slowdown in the real estate sector,” it highlighted.
That uncertainty was evident in the direction of crude oil prices on Wednesday. The broader market opened higher on Wall Street, but energy indexes gave up most of their gains after the OPEC statement.
The global benchmark Brent crude oil price, down Oil was up 0.7% and was trading at $84.87 a barrel by 10 a.m. ET.
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