October 4, 2022: -OPEC+ will consider an oil output cut of more than a million barrels per day (BPD) for the coming week, OPEC sources said on Sunday, in what would be the most significant move yet since the Covid-19 pandemic to address oil market weakness.
The meeting is happening on October 5 against falling oil prices and months of severe demand volatility, which prompted top OPEC+ producer Saudi Arabia to say the group could cut production.
OPEC+, combining OPEC countries and allies such as Russia, has refused to increase output to lower oil prices despite pressure from major consumers, which include the U.S, to help the global economy.
Prices have fallen sharply in the last month due to fears about the global economy and the U.S. dollar after the Federal Reserve raised rates.
A significant production cut is balanced to anger the United States, putting pressure on Saudi Arabia to continue pumping more to help oil prices soften further and reduce revenues for Russia as the West seeks to punish Moscow for dispatching troops to Ukraine.
The West accuses Russia, which invades Ukraine, but the Kremlin calls it an extraordinary military operation.
Saudi Arabia has not condemned Moscow’s actions amid complex relations with the administration of U.S. President Joe Biden.
Last week, a source familiar with the Russian thinking said Moscow would like to see OPEC+ cutting 1 million BPD or one percent of global supply.
That would be the most significant cut since 2020, when OPEC+ reduced output by a record 10 million BPD as demand crashed due to the Covid pandemic. The group spent the next two years unwinding those record cuts.
On Sunday, the sources said the cut could exceed 1 million BPD. One of the suggested cuts could also include an additional voluntary reduction of production by Saudi Arabia.
OPEC+ will meet in person in Vienna for the first time since March 2020.
Analysts and OPEC watchers such as UBS and JPMorgan have recently suggested a cut of around 1 million BPD on the cards and could help arrest the price decline.
″$90 oil is non-negotiable for the OPEC+ leadership. Hence they will act to safeguard this price floor,” said Stephen Brennock of oil broker PVM.
