LONDON, Oct 3 (Portal) – The OPEC+ group of oil producers is discussing production cuts of more than 1 million barrels per day (bpd), OPEC sources said, and voluntary cuts by individual members could come, making it their biggest Reduction since 2020.
The group will meet in Vienna on October 5 — in person for the first time since March 2020 — amid falling oil prices and months of severe market volatility, which prompted top OPEC+ producer Saudi Arabia to say the group could scale back production .
OPEC+, which unites OPEC countries and allies like Russia, has gradually raised its production target in a bid to reverse record 2020 cuts.
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But now it faces a sharp drop in prices, which have fallen from as low as $120 to below $90 in recent months on concerns about the global economy and a rally in the US dollar after the US Federal Reserve hiked interest rates US dollar per barrel fell.
“It could be as significant as the April 2020 meeting,” the source said, referring to OPEC+ agreeing on record supply cuts of around 10 million bpd, or 10% of global supply, as the COVID-19 pandemic hit the demand dropped.
A significant cut is likely to anger the United States, which has been pressuring Saudi Arabia to keep pumping more in a bid to further slash oil prices and cut revenue for Russia as the West seeks to blackmail Moscow into sending troops to the US to punish Ukraine.
What the West calls an invasion, the Kremlin calls a special military operation.
Saudi Arabia has not condemned Moscow’s actions given the difficult relations with the government of US President Joe Biden.
The logo of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, March 16, 2010. Portal/Heinz-Peter Bader/File Photo
Last week, a source familiar with Russian thinking said Moscow would welcome OPEC+ cutting its production target by 1 million barrels per day (bpd), or 1% of global supply.
On Sunday, sources said the cut could exceed 1 million bpd.
On Monday, an OPEC source said voluntary cuts by individual members would add to that number.
It was not yet clear to what extent Saudi Arabia or other top Gulf OPEC producers could contribute to voluntary cuts.
In recent years, only Saudi Arabia has offered voluntary cuts to give markets an additional boost.
“My instinct is that if they (OPEC+) have proposed a cut and prices are still going down, they have to do it, and bigger than they wanted,” said Raad Alkadiri, managing director of Eurasia Group.
PVM’s Stephen Brennock said fears of a demand-dampening recession have rocked OPEC+ and they are therefore poised to take preemptive action.
“It must be noted that OPEC+ is already pumping more than 3 million bpd below target, so further cuts will only exacerbate existing supply shortages,” he said.
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Reporting by Portal OPEC, Newsroom; Edited by David Goodman and Louise Heavens
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