OPEC+ to consider deeper oil output cuts ahead of Russia sanctions and proposed price cap
OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
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OPEC and non-OPEC oil producers could impose deeper oil output cuts on Sunday, energy analysts said, as the influential energy alliance weighs the impact of a pending ban on Russia’s crude exports and a possible price cap on Russian oil.
OPEC+, a group of 23 oil-producing nations led by Saudi Arabia and Russia, will convene on Sunday to decide on the next phase of production policy.
The highly anticipated meeting comes ahead of potentially disruptive sanctions on Russian oil, weakening crude demand in China and mounting fears of a recession.
Claudio Galimberti, senior vice president of analysis at energy consultancy Rystad, told CNBC from OPEC’s headquarters in Vienna, Austria, that he believes the group “would be better off to stay the course” and roll over existing production policy.
“OPEC+ has been rumored to consider a cut on the basis of demand weakness, specifically in China, over the past few days. Yet, China’s traffic nationwide is not down dramatically,” Galimberti said.
Energy market participants remain wary about the European Union’s sanctions on the purchases of the Kremlin’s seaborne crude exports on Dec. 5, while the prospect of a G-7 price cap on Russian oil is another source of uncertainty.
The 27-nation EU bloc agreed in June to ban the purchase of Russian seaborne crude from Dec. 5 as part of a concerted effort to curtail the Kremlin’s war chest following Moscow’s invasion of Ukraine.
Concern that an outright ban on Russian crude imports could send oil prices soaring, however, prompted the G-7 to consider a price cap on the amount it will pay for Russian oil.
No formal agreement has yet been reached, although Reuters reported Thursday that EU governments had tentatively agreed to a $60 barrel price cap on Russian seaborne oil.
“The other factor OPEC will need to consider is indeed the price cap,” Galimberti said. “It’s still up in the air, and this adds to the uncertainty.”
The Kremlin has previously warned that any attempt to impose a price cap on Russian oil will cause more harm than good.
‘So much uncertainty’
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.
The energy alliance recently hinted it could impose deeper output cuts to spur a recovery in crude prices. This signal came despite a report from The Wall Street Journal suggesting an output increase of 500,000 barrels per day was under discussion for Sunday.
OPEC+ agreed in early October to reduce production by 2 million barrels per day from November. It came despite calls from the U.S. for OPEC+ to pump more to lower fuel prices and help the global economy.
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Speaking earlier this week, RBC Capital Markets’ Helima Croft said there was no expectation of a production increase from the upcoming OPEC+ meeting and a “significant chance” of a deeper output cut.
“There is so much uncertainty,” Croft told CNBC’s “Squawk Box” on Tuesday. OPEC delegates “have to factor in what happens with China but also what happens with Russian production.”
“My expectation right now is, if prices are flirting with Brent breaking into the 70s, certainly OPEC will do a deeper cut, but the question is, how do they factor in what is going to come the next day?” Croft said. “So, I still think it is up for grabs.”
Oil prices, which have fallen sharply in recent months, were trading slightly lower ahead of the meeting.
International Brent crude futures traded 0.2% lower at $87.78 a barrel on Friday morning in London, down from over $123 in early June. U.S. West Texas Intermediate futures, meanwhile, dipped 0.3% to trade at $80.95, compared to a level of $122 six months ago.
“Barring any negative surprise during Sunday’s virtual OPEC+ talks and assuming a healthy compromise on Russian oil price cap before the EU sanctions kick in on Monday it is tempting to audaciously conclude that the bottom has been found,” Tamas Varga, analyst at broker PVM Oil Associates, said in a note Thursday.
Varga said oil prices trading below $90 a barrel was “not acceptable” for OPEC and Russia was widely expected to introduce retaliatory measures against those signing up for the G-7 deal.
“Choppy and nervous market conditions will prevail, but the new month should bring more joy than November,” he added.
‘High probability’ of an output cut
Jeff Currie, global head of commodities at Goldman Sachs, said OPEC ministers would need to discuss whether to accommodate further weakness in demand in China.
“They got to deal with the fact that, hey, demand is down in China, prices are reflecting it, and do they accommodate that weakness in demand?” Currie told CNBC’s Steve Sedgwick on Tuesday.
“I think there is a high probability that we do see a cut,” he added.
Analysts at political risk consultancy Eurasia Group said that lower oil prices “heighten the risk” of a new OPEC+ output cut.
“Ultimately, the decision will depend on the trajectory of the oil price when OPEC+ meets and how much disruption is evident in markets because of the EU sanctions,” Eurasia Group analysts led by Raad Alkadiri said Monday in a research note.
If Brent crude futures dip below $80 a barrel for a sustained period ahead of the meeting, Eurasia Group said OPEC+ leaders could push for another production cut to shore up prices and bring Brent futures back up to around $90 — a level “that they appear to favor.”
Wind energy powered 20% of all electricity consumed in Europe (19% in the EU) in 2024, and the EU has set a goal to grow this share to 34% by 2030 and more than 50% by 2050.
To stay on track, the EU needs to install 30 GW of new wind farms annually, but it only managed 13 GW in 2024 – 11.4 GW onshore and 1.4 GW offshore. This is what’s holding the EU back from achieving its wind growth goals.
Three big problems holding Europe’s wind power back
Europe’s wind power growth is stalling for three key reasons:
Permitting delays. Many governments haven’t implemented the EU’s new permitting rules, making it harder for projects to move forward.
Grid connection bottlenecks. Over 500 GW(!) of potential wind capacity is stuck in grid connection queues.
Slow electrification. Europe’s economy isn’t electrifying fast enough to drive demand for more renewable energy.
Brussels-based trade association WindEurope CEO Giles Dickson summed it up: “The EU must urgently tackle all three problems. More wind means cheaper power, which means increased competitiveness.”
Permitting: Germany sets the standard
Permitting remains a massive roadblock, despite new EU rules aimed at streamlining the process. In fact, the situation worsened in 2024 in many countries. The bright spot? Germany. By embracing the EU’s permitting rules — with measures like binding deadlines and treating wind energy as a public interest priority — Germany approved a record 15 GW of new onshore wind in 2024. That’s seven times more than five years ago.
If other governments follow Germany’s lead, Europe could unlock the full potential of wind energy and bolster energy security.
Grid connections: a growing crisis
Access to the electricity grid is now the biggest obstacle to deploying wind energy. And it’s not just about long queues — Europe’s grid infrastructure isn’t expanding fast enough to keep up with demand. A glaring example is Germany’s 900-megawatt (MW) Borkum Riffgrund 3 offshore wind farm. The turbines are ready to go, but the grid connection won’t be in place until 2026.
This issue isn’t isolated. Governments need to accelerate grid expansion if they’re serious about meeting renewable energy targets.
Electrification: falling behind
Wind energy’s growth is also tied to how quickly Europe electrifies its economy. Right now, electricity accounts for just 23% of the EU’s total energy consumption. That needs to jump to 61% by 2050 to align with climate goals. However, electrification efforts in key sectors like transportation, heating, and industry are moving too slowly.
European Commission president Ursula von der Leyen has tasked Energy Commissioner Dan Jørgensen with crafting an Electrification Action Plan. That can’t come soon enough.
More wind farms awarded, but challenges persist
On a positive note, governments across Europe awarded a record 37 GW of new wind capacity (29 GW in the EU) in 2024. But without faster permitting, better grid connections, and increased electrification, these awards won’t translate into the clean energy-producing wind farms Europe desperately needs.
Investments and corporate interest
Investments in wind energy totaled €31 billion in 2024, financing 19 GW of new capacity. While onshore wind investments remained strong at €24 billion, offshore wind funding saw a dip. Final investment decisions for offshore projects remain challenging due to slow permitting and grid delays.
Corporate consumers continue to show strong interest in wind energy. Half of all electricity contracted under Power Purchase Agreements (PPAs) in 2024 was wind. Dedicated wind PPAs were 4 GW out of a total of 12 GW of renewable PPAs.
Read more: Renewables could meet almost half of global electricity demand by 2030 – IEA
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the official unveiling of the new Tesla Model Y, Mazda 6e, Aptera solar car production-intent, and more.
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The Chinese EV leader is launching a new flagship electric sedan. BYD’s new Han L EV leaked in China on Friday, revealing a potential Tesla Model S Plaid challenger.
What we know about the BYD Han L EV so far
We knew it was coming soon after BYD teased the Han L on social media a few days ago. Now, we are learning more about what to expect.
BYD’s new electric sedan appeared in China’s latest Ministry of Industry and Information Tech (MIIT) filing, a catalog of new vehicles that will soon be sold.
The filing revealed four versions, including two EV and two PHEV models. The Han L EV will be available in single- and dual-motor configurations. With a peak power of 580 kW (777 hp), the single-motor model packs more power than expected.
BYD’s dual-motor Han L gains an additional 230 kW (308 hp) front-mounted motor. As CnEVPost pointed out, the vehicle’s back has a “2.7S” badge, which suggests a 0 to 100 km/h (0 to 62 mph) sprint time of just 2.7 seconds.
To put that into perspective, the Tesla Model S Plaid can accelerate from 0 to 100 km in 2.1 seconds. In China, the Model S Plaid starts at RBM 814,900, or over $110,000. Speaking of Tesla, the EV leader just unveiled its highly anticipated Model Y “Juniper” refresh in China on Thursday. It starts at RMB 263,500 ($36,000).
BYD already sells the Han EV in China, starting at around RMB 200,000. However, the single front motor, with a peak power of 180 kW, is much less potent than the “L” model. The Han EV can accelerate from 0 to 100 km/h in 7.9 seconds.
At 5,050 mm long, 1,960 mm wide, and 1,505 mm tall with a wheelbase of 2,970 mm, BYD’s new Han L is roughly the size of the Model Y (4,970 mm long, 1,964 mm wide, 1,445 mm tall, wheelbase of 2,960 mm).
Other than that it will use a lithium iron phosphate (LFP) pack from BYD’s FinDreams unit, no other battery specs were revealed. Check back soon for the full rundown.
Source: CnEVPost, China MIIT
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