December 8, 2023

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OPEC + surprises energy markets with a slight production cut

OPEC + surprises energy markets with a slight production cut

The OPEC logo on a banner at the group’s headquarters in Vienna, Austria.

Bloomberg | Bloomberg | Getty Images

A group of some of the world’s most powerful oil producers agreed on Monday to cut production slightly from next month, surprising energy markets at a time of great turmoil.

OPEC and its non-OPEC partners, an influential energy alliance known as OPEC+, decided to cut production targets by about 100,000 barrels per day from October.

Energy analysts had widely expected the group to continue its approach to production policy.

Last month, OPEC + agreed To increase oil production by only 100,000 barrels per day. The small increase was widely interpreted as a refusal by US President Joe Biden after his visit to Saudi Arabia to ask the OPEC chief to pump more to calm prices and help the global economy.

OPEC+ said in a statement that Monday’s decision to return to August production levels was because the upward adjustment was “intended for September only.”

The next OPEC+ meeting is scheduled for October. 5.

Oil prices traded sharply higher on Monday. international standard Brent While crude futures rose 3.9% to $96.63 a barrel at around 1:45 pm London time West Texas Intermediate US Futures contracts jumped 3.6 percent to $90 a barrel.

Oil prices have fallen about 25 percent since early June, after touching multi-year highs in March. The drop was driven by mounting concerns that higher interest rates and Covid-related restrictions in parts of China could slow global economic growth and curb demand for oil.

Monday’s announcement from OPEC+ comes amid a downturn The bitter and escalating energy dispute between Russia and the WestMany in Europe are deeply concerned about the possibility of a winter recession and gas shortages.

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Meanwhile, market participants are closely watching the prospects for a Increasing the supply of Iranian crude If Tehran can secure a new version of the 2015 nuclear deal.

G7 supports Russian oil price ceiling

European gas prices jumped over 25% On Monday after the Russian state-owned energy giant Gazprom announce It will not reopen the main gas pipeline to Europe.

Gazprom said the indefinite shutdown was due to an oil leak in the turbines. The Nord Stream 1 pipeline, which connects Russia to Germany via the Baltic Sea, was due to reopen on Saturday after three days of maintenance.

The Kremlin’s halt to European gas flows followed a joint statement from the Group of Seven economic powers supporting a plan to implement Mechanism for setting prices on Russian oil exports.

The OPEC+ announcement comes amid a bitter energy dispute between Russia and the West.

Assad Niazi Afp | Getty Images

The G7 initiative is designed to exhaust Russian President Vladimir Putin’s ability to finance the war in Ukraine. Russia has said it will stop selling oil to countries that impose price controls on Russian energy exports.

European Union policymakers have accused the Kremlin of weaponizing energy supplies in a bid to sow uncertainty across the 27-nation bloc and boost energy prices amid the Kremlin’s attack on Ukraine.

Moscow denies any blame for the Nord Stream 1 shutdown.