The Organization of the Petroleum Exporting Countries (OPEC) and its oil-exporting allies, collectively known as OPEC+ agreed on Wednesday on an output reduction of 2 million barrels per day from November.
While the media speculations were that OPEC+ might cut output by 500,000 to a million barrels per day, it announced during OPEC+’s Joint Ministerial Monitoring Committee in-person meeting in Vienna that the cut would amount to the equivalent of 2% of global demand.
This is the biggest agreed cut since the 2020 COVID-19 pandemic, when lockdowns crashed the world demand for oil and could prompt a recovery in oil prices across world markets after fears of a global economic recession pushed them down to about $90 from $120 three months ago, rising US interest rates and a stronger dollar.
It’s still unclear if the announced cuts, which are based on existing baseline figures, could include existing under-production by OPEC+, which fell about 3.6 million bpd short of its output target in August, or if they could include additional voluntary reductions by members such as Saudi Arabia.
Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman emphasized following the meeting that the group’s priority is to maintain a sustainable oil market, noting that the real cuts would be 1-1.1 million bpd.
It is expected that Saudi Arabia and Russia will bear the brunt of the cuts – accounting for more than half the total cuts – with their targets reduced by 526,000 bpd.
The alliance’s efforts to boost the energy market amid a global economic slowdown that is weighing on fuel demand increased the oil prices which gained more than 10% over the past week in the run-up to the OPEC+ meeting after registering their worst quarter in two years last month.
On Thursday, the benchmark for two-thirds of the world’s oil, Brent crude, was up 0.19% at $93.55 a barrel while the US West Texas Intermediate was trading at $87.92 a barrel – 0.18% higher.
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