The influential energy alliance of massive oil producers OPEC+ agreed to cut its October crude output by 100,000 barrels a day, which will revert the output level to August numbers in order to support prices.
The announcement comes amid a bitter energy dispute between Russia and the West. There is a slowing global economy that is also posing demand headwinds. It also comes as a potential Iran nuclear deal would bring more crude oil into the market.
The group had an online meeting on Monday and decided to cut output quotas. The next meeting of the pack of oil-producing nations will come on October 5, during which they will gauge market dynamics.
In July, OPEC+ agreed that it would increase crude output by 100,000 barrels a day for the month of September.
The increased output was part of the group’s recalibration amid continued price volatility, combined with fears of a recession and supply constraints that have been caused by Russia invading Ukraine.
There is a bitter and escalating energy dispute between Russia and the West. Europe is deeply concerned about the prospect of a recession, as well as a winter gas shortage. Energy prices have already skyrocketed, with prices expected to only continue to increase in Europe.
The group decided today that it would now revert to the production level of August 2022 for both OPEC and non-OPEC participating countries for the month of October.
The group noted that the upward adjustment of 0.1 million BPD to the production level was intended only for one month, the month of September.
The group requested that the OPEC+ chairman consider calling for a ministerial meeting of OPEC and non-OPEC countries in order to address any new market developments. Energy analysts had broadly expected the group to stay the course with its production policy.
Oil prices traded sharply higher on Monday. International benchmark Brent crude futures rose 3.9% to $96.63 a barrel at around 1:45 pm London time, while U.S. West Texas Intermediate futures jumped 3.6% to $90 a barrel.
Oil prices have fallen around 25% since early June after touching multi-year highs in March. The decline has been fueled by growing concerns that interest rate hikes and Covid-related restrictions in parts of China could slow global economic growth and curtail oil demand.