The “OPEC Plus” group agreed to the largest production cut since the “Covid-19” pandemic, at a meeting in Vienna, today. And the OPEC Plus production cut may lead to a recovery in oil prices, which fell to regarding $90, following they were $120 three months ago, due to fears of a global economic recession, raising US interest rates, and a rising dollar.
An informed source said that the United States is pressing the Organization of Petroleum Exporting Countries (OPEC) not to proceed with production cuts, and says that market fundamentals do not support the reduction.
Sources stated that it is still not clear whether the cuts may include additional voluntary cuts by members or whether they may include the actual production shortages in the producing countries.
The production of «OPEC Plus» in August was below the target by regarding 3.6 million barrels per day.
“If oil prices rise on massive production cuts, it is likely to irritate the administration of US President Joe Biden ahead of the US midterm elections,” Citi analysts said in a note.
“There may be further political reactions from the United States, including additional withdrawals of strategic stocks,” they added. JPMorgan also expected Washington to take countermeasures by releasing more stocks from the stockpile.
Members of OPEC Plus, which includes OPEC countries and non-OPEC producers, including Russia, say that they seek to prevent fluctuations, and not target a specific oil price. Brent crude, the global benchmark, rose today, towards $93 a barrel, following rising yesterday.
The production cut by “OPEC Plus”, which takes effect from early November, reflects the concern that the global economy is slowing rapidly due to the tight monetary policies adopted by the major central banks.
Russian Deputy Prime Minister Alexander Novak said that it was agreed to extend the “OPEC Plus” agreement until the end of 2023.
