Bloomberg headline: OPEC+ Agrees to Make Token Supply Cut to Steady Oil Market
Group will curb production by 100,000 barrels a day in October
The move reverses a production increase agreed last month
ByDina Khrennikova, Salma El Wardany, Grant Smith, and Ben Bartenstein
September 5, 2022 at 8:01 AM EDTUpdated onSeptember 5, 2022 at 8:50 AM EDT
While traders had mostly expected the Organization of Petroleum Exporting Countries and its allies would hold steady, the coalition’s leading producer had indicated a possible pivot. Saudi Energy Minister Prince Abdulaziz bin Salman said a couple of weeks ago that the OPEC+ alliance – which has just finished restoring the output halted during the 2020 pandemic – was now considering cuts as a way to stabilize excessive volatility in global markets.
Crude futures had lost 20% in the past three months on fears of a global economic slowdown, imperiling the revenue windfall being enjoyed this year by the Saudis and their partners. China, the biggest oil importer, has exhibited signs of an “alarming” economic slowdown, with apparent consumption sinking 9.7% in July to a two-year low amid weaker business activity and harsh Covid-19 curbs. Meanwhile, the US has skirted close to recession and pursued stricter monetary policy.
The fresh production cut suggests “there is a desire to defend oil prices to stay above the level of $90 a barrel,” said Giovanni Staunovo, a commodity analyst at UBS Group AG.