In a move that could put pressure on global economic growth, the Organization of the Petroleum Exporting Countries (OPEC) and its oil-exporting allies, collectively known as OPEC+, are set to consider Wednesday its most drastic reduction of production in two years in order to deal with falling fuel prices.
Opec+ is to hold its first in-person meeting since March 2020 in Vienna on October 5.
Delegates in the group said that OPEC+ is considering a cut of more than 1 million barrels a day – the largest production reduction since the COVID-19 pandemic – a move that would boost the oil prices and further strain Western consumers amid soaring inflation.
Such an output cut could boost oil prices to $90 a barrel or more.
But the possibility of an oil production cut by OPEC+ – which is coordinating and stabilizing the global oil market and includes Iran, Iraq, and Saudi Arabia – could further destabilize the global economy more broadly.
The IMF, the World Bank, the OECD, and the Institute of International Finance have all slashed their global economic growth forecasts for this year with the global recession fears, surging inflation, a strong US dollar, and monetary tightening by central banks around the world weighing on the market.
The early trading on Monday has seen oil prices rallying after media reports of the planned production cut with the West Texas Intermediate, the gauge that tracks US crude, going up 2.91% at $81.80 a barrel while Brent was trading at $87.52 a barrel, 2.80%t higher.
In the three months to the end of September, Brent fell by about 22% while WTI shed about 25%.
The skyrocketing energy prices in the US and elsewhere earlier this year are mostly the result of Russia, one of the OPEC+ allies, which has been targeted by a series of international sanctions since its invasion of Ukraine.
US Treasury Secretary Janet Yellen cautioned last month that the EU efforts to further limit Russian profits from the sale of oil may push up gas prices again in the winter.
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