True to expectation, the 23-member OPEC+ alliance yesterday slashed its November output by 2 million barrels per day. The output cut is the latest effort by the oil producers’ alliance to support prices.
The 2million barrels per day cut is the biggest production cut since the start of the pandemic in 2020, observers noted yesterday.
The group said in a statement after the group’s first in-person meeting in Vienna since March 2020, that it will reduce its overall production by 2 million bpd from the August 2022 required production levels starting November 2022.
The decision was made in “light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive and pre-emptive”, OPEC+ said.
The move is the latest effort by the oil producers’ alliance to support prices as a potential economic slowdown weighs heavily on the outlook for fuel demand.
Also Read: Russia May Propose Output Cut At Next OPEC+ Meeting
Following the decisions yesterday, Brent, the benchmark for two thirds of the world’s oil, rose 1.75% to $93.41 per barrel at 7.09pm UAE time on Wednesday. West Texas Intermediate, the gauge that tracks US crude, was trading 1.43% higher at $87.76 a barrel.
OPEC and non-OPEC members also decided to extend their alliance until December 31, 2023, the statement said. The group announced that the monthly OPEC joint ministerial monitoring committee meetings will now be held once every two months, and that the OPEC and non-OPEC ministerial meeting will take place every six months, with the next one scheduled for December 4.
It said however that meetings can be called “at any time to address market developments if necessary.”
“We will continuously prove that OPEC+ is here to stay as a moderating force to bring about stability,” Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said during a post-meeting press conference.
“Energy is something that can never be attended to in short-term tweaks and moves … the world energy markets need attendance, careful planning and investments.”
Also Read: OPEC Names Nigeria, Russia Laggards in Oil Production Quotas
Oil prices, which posted their worst quarter in two years last month, have rallied by about 5% on reports about an output cut ranging from 500,000 bpd to two million bpd.
Since peaking close to $140 a barrel in March, prices have retreated to about $90 a barrel this October as markets grow anxious over demand conditions going into 2023.
Growing fears of a global recession, a strong US dollar, surging inflation and monetary tightening by central banks around the world have continued to weigh on the market since June.
The International Monetary Fund, the World Bank, the Institute of International Finance and the Organisation for Economic Co-operation and Development have all slashed their global economic growth forecasts for this year.
“Global rate hikes will inevitably impact aggregate demand and therefore oil consumption, too, especially in developing countries but its impact will not as severe as during the pandemic,” said Tamas Varga, oil analyst at London broker PVM Oil.
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