The 13-nation Organization of Petroleum Exporting Countries (OPEC) and its allies may consider cutting oil output by more than a million barrels a day at its meeting on 5 October in Vienna, Reuters reported, citing sources.
The figure which has reportedly been mulled is slightly above estimates suggested last week, which ranged between 500,000 bpd and a million bpd. The actual size of the cuts won’t be decided until members meet, delegates were cited as saying.
OPEC+, which comprises the 13 OPEC countries (Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates and Venezuela) and, since 2016, 11 other major producers (Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Philippines, Russia, Sudan and South Sudan) is meeting in person for the first time since March 2020. The alliance had been meeting online each month.
"It is a meeting that is taking place at a very interesting global time," a source was cited as saying.
The cuts in oil production are being considered to stem a recent slump in prices from the multi-highs reached in March. Saudi Arabia, OPEC’s de facto leader, had originally hinted at the possibility of cuts in August to correct the volatile market.
Back in February, after Russia launched its special military operation in Ukraine, the price of Brent crude soared above $125 a barrel. However, over the following months it dropped to $85.
A larger-than-anticipated reduction in oil production would be seen as reflecting concerns that global economic growth is slowing more than was forecast a few months ago.
Over the past months, sanctions imposed by the West on Russia in retaliation for its military operation in Ukraine fueled energy costs and whipped up nearly two-digit inflation across Europe. The raging energy and inflation crisis risk propelling major economies into recessions, the Organization for Economic Co-operation and Development (OECD) said on 26 September. Global growth this year was expected at 3.0 percent but projected to slow to 2.2 percent in 2023 in a dramatic downgrade from earlier forecasts.
Prices have been affected by rapidly tightening monetary policy in response to the challenges. In September, nearly every major currency lost ground against the US dollar as the Federal Reserve raised interest rates to rein in inflation. Banks such as JPMorgan Chase & Co were cited as saying OPEC+ may need to lower output by least 500,000 barrels a day to stabilize prices.
The alliance sent a message with its symbolic production cut at its last meeting in early September, in a return to the levels of August, reducing output by 100,000 bpd in October.
Saudi Energy Minister Prince Abdulaziz bin Salman vowed to remain “proactive". In an interview with Energy Intelligence, Saudi Arabia's Energy Minister stated the decision was an expression of “willingness to use all of the tools in our kit.”
“This simple tweak shows that we are attentive, pre-emptive and proactive in supporting the stability of the market to the benefit of market participants and the industry,” he said.
Russian Deputy Prime Minister Alexander Novak said at the time that oil demand was recovering and was reaching pre-pandemic levels.
“We expect that next year, early next year, we will reach the corresponding indicators, above 100 million barrels per day of oil demand," he added.
Earlier, on 1 September, Novak condemned the “absurd” idea of imposing a price cap on Russian oil, announced by the G7 finance ministers. He warned that Moscow would not deliver oil and oil products to countries that support the decision.
Moscow has repeatedly warned nations that the decision to cut themselves off from Russian energy would mean the collapse of entire sectors of the European Union’s economy.