As OPEC+ contemplates lowering output by more than 1M BPD, for its greatest decrease since the epidemic, to bolster the market, oil prices increased by more than 3% in early Asian trade on Monday.
By 0622 GMT, Brent oil futures had recovered $2.36, or 2.8%, from their Friday low of $87.50 a barrel. After falling by 2.1% the previous day, U.S. WTI crude was up 2.9%, or $2.27, at $81.76 per barrel. Oil prices fell for a fourth month since June as consumption slowed due to the COVID-19 lockdown in China, the world’s biggest energy consumer, and weighed on international financial markets.
Before its meeting on Wednesday, OPEC+ is discussing a production reduction of more than 1M BPD to maintain prices. If accepted, the group’s second straight month of output reductions will be after a 100,000-bed decrease last month. However, because several OPEC+ members are producing far less than their quotas, experts anticipate that the impact of the cut on supply would be much smaller than the headline figure.
What Do Experts Predict for the Oil Markets?
In a note, ING analysts predicted that only a small number of producers would have to make cuts if their output goals were met. According to two sources from the producer group, OPEC+ missed its production goals by around 3M BPD in July as sanctions on some members and limited investment by others hindered efforts to increase output. In a note, ANZ analysts stated that the market would ignore any quantity below 500,000 BPD. Thus we could see a good likelihood of a reduction of up to 1M BPD.
The short-term outlook for a sharp increase in Brent oil prices is positive. However, consultancy FGE said concerns about a global recession could limit gains. According to Friday’s report, if OPEC+ decides to cut production in the short term, it could increase OPEC+’s spare capacity and put more pressure on prices in the long term.