October 5, 2022

OPEC+ agrees to small oil production cuts

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria on August 21, 2015. REUTERS/Heinz-Peter Bader/File Photo

Sign up now for unlimited free access to Reuters.com

  • Supply will be cut by 0.1 million bpd from October
  • Iran nuclear deal will boost oil supply
  • Russia’s gas supplies to Europe were further cut
  • Brent crude fell from $120 to $96 in June

LONDON, Sept 5 (Reuters) – OPEC and its allies, led by Russia, agreed on Monday to cut oil output by a small amount in a bid to boost prices, which have fallen on fears of an economic slowdown.

Oil producers said they would cut production by 100,000 barrels per day (bpd), which is just 0.1% of global demand, and agreed they could meet at any time to adjust production before the next meeting scheduled for Oct. 5.

The decision maintains the status quo as OPEC observes fluctuations in oil prices.

Sign up now for unlimited free access to Reuters.com

“OPEC+ is wary of prolonged price volatility created by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential US-Iran deal and efforts to create a Russian oil price ceiling,” said Matthew Holland at Energy Aspects.

Top OPEC producer Saudi Arabia last month flagged the possibility of production cuts to address what it sees as an exaggerated fall in oil prices. read more

Benchmark Brent crude fell to around $95 from $120 a barrel in June due to economic slowdown and recession in the West.

It was drawn by a potential supply boost for Iranian crude oil to return to the market if Tehran is able to renew its 2015 nuclear deal with global powers.

“The political angle seems to be that Saudi Arabia’s message to the US about the revival of the Iran nuclear deal … is difficult to interpret as anything other than a decision to support prices,” said Thomas Varga of oil broker PVM.

While the prospect of a nuclear deal on Friday appears slim, if sanctions are eased, Iran is expected to add 1 million bpd to supply, or 1% of global demand. read more

“The cut suggests there is a desire to protect oil prices above $90 a barrel,” said Giovanni Stanovo at UBS.

Raad AlKadiri at Eurasia Group said: “This is a signal of intent … the decision to cut reinforces “don’t take us for granted”.

However, signals from the physical market suggest that supply is tight and many OPEC countries are producing below targets, while new Western sanctions threaten Russian exports.

Russia has said it will cut off oil supplies to countries that support the idea of ​​capping the price of Russian energy supplies because of the military conflict in Ukraine.

Meanwhile, Russia’s gas supply to Europe has been further cut, which will further drive up prices. read more

“An output cut won’t make them friends at a time when the world is facing a cost-of-living crisis,” said Oanda analyst Craig Erlam.

Sign up now for unlimited free access to Reuters.com

Additional reporting by Rowena Edwards and Olesya Astakova Writing by Dmitry Zhdanikov Editing by David Goodman and David Evans

Our Standards: Thomson Reuters Trust Principles.