OPEC+ will be considering a reduction in oil production of more than a million barrels per day (bpd), OPEC sources stated on Sunday.
This would be the largest move since the COVID-19 pandemic, which was meant to address the market weakness.
This meeting will be held on October 5th, against the backdrop of falling oil prices and months of extreme market volatility, which prompted Saudi Arabia, a top OPEC+ producer to suggest that the group might reduce production.
Despite pressure from major buyers, including the United States to support the global economy, OPEC+ has not increased output to lower oil prices despite being a combination of OPEC members and allies like Russia.
However, prices have fallen sharply over the past month because of fears about the global economy and a rallying U.S. Dollar after the Federal Reserve raised rates.
The United States is likely to be upset by a significant production cut. They have been pressuring Saudi Arabia to pump more oil to soften prices and lower revenues for Russia, while the West seeks sanctions against Moscow for sending troops into Ukraine.
While the West accuses Russia of invading Ukraine’s territory, the Kremlin refers to it as a special military operation.
Despite having difficult relations with President Joe Biden, Saudi Arabia has not condemned Moscow’s actions.
A source close to Russia’s thinking stated last week that Moscow would like to see OPEC+ cut 1 million bpd or 1%of global supply.
This would be the largest cut since 2020 when OPEC+ saw a record 10,000,000 bpd reduction in output due to a crash in demand caused by the COVID pandemic. These record-breaking cuts were unwound by the group over the next two years.
Sources claimed that the cut could be more than 1 million bpd on Sunday. Sources suggest that cuts could also include a voluntary reduction in production by Saudi Arabia.
OPEC+ will be meeting in Vienna for the first time since March 2020.
Analysts and OPEC watchers like JP Morgan and UBS have suggested that a cut of about 1 million bpd is possible and could stop the price fall.
Stephen Brennock, an oil broker at PVM, stated that $90 oil was non-negotiable by the OPEC+ leaders. Therefore, they will protect this price floor.”
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