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OPEC+ to cut oil output for first time in a year: Statement
Prices have fallen because of recession fears
OPEC and allied oil-producing countries, including Russia, cut their supplies to the global economy by 100,000 barrels per day, underlining their unhappiness with crude prices that have sagged because of recession fears.
AFP reported that the body has agreed to this production cut for the first time in more than a year.
While analysts had expected another modest increase, the group led by Saudi Arabia and Russia said in a statement it would reduce output by 100,000 barrels per day in October.
The decision Monday by energy ministers means the cut for October rolls back the mostly symbolic increase of the same amount in September. The move follows a statement last month from Saudi Arabia’s energy minister that the group could reduce output at any time.
The oil producers agreed they could meet any time to adjust production before the next scheduled meeting on October 5, according to Reuters.
The decision essentially maintains the status quo as OPEC has been observing wild fluctuations in oil prices, being pulled by multiple factors in both directions.
"OPEC+ is wary of protracted price volatility generated by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential U.S.–Iran deal and efforts to create a Russian oil price cap," said Matthew Holland at Energy Aspects.
Top OPEC producer Saudi Arabia last month flagged the possibility of output cuts to address what it sees as exaggerated oil price declines.
Benchmark Brent crude oil has dropped to about $95 a barrel from $120 in June on fears of an economic slowdown and recession in the West.
It was also dragged down by a potential supply boost from Iranian crude returning to the market if Tehran is able to revive its 2015 nuclear deal with global powers.
Iran is expected to add 1 million bpd to supply, or 1 per cent of global demand, if sanctions are eased, though the prospects for a nuclear deal looked less clear on Friday.
Signals from the physical market, however, suggest that supply remains tight and many OPEC states are producing below targets while fresh Western sanctions are threatening Russian exports.
Russia has said it will stop supplying oil to countries that support the idea of capping the price of Russian energy supplies over its military conflict in Ukraine.
Russia's gas deliveries in Europe, meanwhile, have been cut further, which is likely to spark more price spikes.
"An output cut won't make them any friends at a time when the world is facing a cost-of-living crisis," said Oanda analyst Craig Erlam.
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