Despite pressure from the U.S. and other countries to increase oil output, OPEC+ appears to cut its output target significantly when it meets on Wednesday.
Oil prices have fallen to around $90 from $120 three months ago amid concerns about a slowing global economy, rising U.S. interest rates, and a stronger currency. A possible OPEC+ production cut could help them rise again. According to sources, OPEC+ aims to achieve goal cuts of more than 1M BPD. On Tuesday, an OPEC source stated that the reductions might reach 2M BPD.
According to sources, the U.S. urges OPEC to refrain from further production cuts, saying fundamentals do not support cuts. The sources said it was unclear whether the cuts included the group’s current production shortfall or further voluntary cuts from players such as Saudi Arabia. In August, OPEC+’s output fell around 3.6M BPD, shy of its goal.
What Do Experts Have to Say?
Analysts at Citi stated that increasing oil prices, if caused by significant output cutbacks, will probably aggravate the Biden Administration before the American midterm elections. About a U.S. anti-trust measure against OPEC, Citi said that there might be more political reactions from the U.S., including additional releases of strategic stockpiles combined with certain wildcards, like further cultivation of a NOPEC bill.
JP Morgan also stated that it anticipated Washington to act by releasing more oil stocks as retaliation. Saudi Arabia and other OPEC+ members, which includes Russia and other oil producers in addition to the Organization of the Petroleum Exporting Countries, have stated that their goal is to reduce volatility rather than to pursue a certain oil price.
Following a rise on Tuesday, benchmark Brent crude traded flat on Wednesday at less than $92 per barrel. The West has accused Russia of turning energy into a weapon, sparking a crisis in Europe that might lead to gas and electricity rationing this winter.
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