OPEC+ will consider an oil production cut of more than a million barrels per day (bpd) next week, OPEC sources said on Sunday, in what would be the biggest move so far since the COVID-19 pandemic. to address the weakness of the oil market.
The meeting will take place on October 5 against the backdrop of falling oil prices and months of severe market volatility that prompted top OPEC+ producer Saudi Arabia to say the group could cut output.
The news of the consideration pushed up the price of oil during Asian trading hours. Brent crude, the global benchmark, was up 3.28% at 7:49 p.m. ET on Sunday.
OPEC+, which combines OPEC countries and allies such as Russia, has refused to increase production to lower oil prices despite pressure from major consumers, including the United States, to help the world economy.
However, prices have fallen sharply in the last month due to fears over the global economy and the rally in the US dollar after the Federal Reserve raised rates.
A significant output cut is about to anger the United States, which has been pressuring Saudi Arabia to continue pumping more to help further weaken oil prices and cut into Russia’s revenue as the West seeks punish Moscow for sending troops to Ukraine.
The West accuses Russia of invading Ukraine, but the Kremlin calls it a special military operation.
Saudi Arabia has not condemned Moscow’s actions amid difficult relations with the administration of US President Joe Biden.
Last week, a source familiar with Russian thinking said that Moscow would like to see OPEC+ cut 1 million bpd or one percent of global supply.
That would be the biggest cut since 2020 when OPEC+ cut output by a record 10 million bpd as demand plummeted due to the COVID pandemic. The group spent the next two years undoing those record cuts.
On Sunday, sources said the cut could top 1 million bpd. One of the sources suggested that the cuts could also include a further voluntary reduction in production by Saudi Arabia.
OPEC+ will meet in person in Vienna for the first time since March 2020.
OPEC analysts and watchers such as UBS and JP Morgan have suggested in recent days that a cut of around 1 million bpd was on the cards and could help stem the slide in prices.
“Oil at $90 is non-tradable for OPEC+ leaders, so they will act to safeguard this floor price,” said Stephen Brennock of oil broker PVM.