The “OPEC +” alliance, which includes member states of the Organization of the Petroleum Exporting Countries and allies led by Russia, agreed today, Monday, to slightly reduce oil production to boost prices that have fallen due to fears of an economic slowdown.
This decision came after the publication of information that Russia is offering to cut production. As the “Wall Street” newspaper reported before the meeting, citing unnamed sources close to the organization, Russia would not support the “OPEC +” decision to reduce oil production.
Crude producers will cut production by 100,000 barrels per day, which is equal to only 0.1 percent of global demand, in the month of October, and they also agreed on the possibility of holding a meeting at any time to amend the production policy before the next meeting scheduled for the fifth of October.
It is true that a 100,000 barrel production cut will not affect the physical market volumes (estimated at 2.9 million barrels as collective quotas), but it does send a signal to the market that “OPEC +” is serious about cuts.
And a statement of the alliance confirmed that the ministerial meeting of “OPEC +” “confirmed the negative impact of volatility and low liquidity on the oil market at the present time, and the need to support market stability and the efficiency of its dealings,” noting that the high volatility and the increasing state of uncertainty require a continuous assessment of market conditions, and readiness to immediately adjust production levels in various ways, if the need arises.
And “OPEC +” decided to return the production level, in October 2022, to the levels of August 2022, knowing that the decision of the thirty-first ministerial meeting of the group to increase 100,000 barrels per day this September 2022, was for one month only.
After today’s “OPEC +” meeting, oil prices jumped more than 3 percent, with West Texas Intermediate crude reaching $90 a barrel. Brent crude rose 3.5 percent to $96.64.