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The OPEC+ countries which meet on Wednesday October 5 in Vienna might endorse a significant drop in production to raise crude prices. A prospect that is already shaking the market.
The readjustment of oil production seems inevitable. First because ” the market is saturated explains Jean-Michel Gauthier, executive director of the Energy and Finance chair at HEC Paris, with an excess supply of around one million barrels a day. The equivalent of what is envisaged as a drop in production, according to several sources.
To this must be added, the Chinese “zero Covid” policy, the rise of the dollar and the prospects of recession which plead for a slowdown in demand for crude.
Objective: to bring prices up in the short term
This context has favored the fall in prices since June due to heavy fluctuations to bear for the producing States. No wonder they want to act to bail out their budget. The announcement of an imminent drop in production was also enough to push up the prices of Brent, the European benchmark, but also of the American benchmark (WTI) on Monday, October 3.
On the other hand, for longer-term prices, the equation is not so simple. What will not be put on the market will replenish the reserves, in particular those of Saudi Arabia. In particular, we are talking regarding stocks that are called available extraction capacities, in the jargon, which are not volumes that can be quickly released. As such, they are closely watched by analysts and are even determining prices in the medium and long term. The higher these stocks are, the more they reassure the market and tend to pull prices down.
A blow for the United States
It is therefore impossible to say whether a drop in production will mean the end of low prices for a long time… But what is certain is that such a decision, if confirmed, should not please the United States. who continue to plead for the floodgates to be opened, in order to relieve the pressure on American consumers in the run-up to the midterm elections.
Russia, which since the invasion of Ukraine produces less and sells its oil at a discount, should on the other hand, like all the crude exporting states, benefit from prices which are starting to rise once more.
