OPEC and Russia take an unexpected turn: they cut production by 100,000 barrels and oil shoots up 4%

The Organization of the Petroleum Exporting Countries (OPEC) has returned to cuts sooner than expected. Although the movement is minimal, the markets seem to have gotten the message. OPEC+ (counts OPEC, Russia and other satellites of Moscow) has announced that oil production will return to August levels, Although this is a symbolic cut in oil supply (to be executed in October), the The intentions are clear and worrying for importing countries: OPEC has left production increases behind and could now focus on cuts, to achieve what they call price stability and crude oil markets.

In this way, the group led by Saudi Arabia and Russia will reduce production by 100,000 barrels per day next month, which returns the production of the cartel and its allies to August levels, as revealed by the delegates in the official statement published. on OPEC’s own page. On the contrary, the market consensus had foreseen a quiet meeting with no changes in production.

This surprise move exactly reverses the production increase announced for September. This increase in oil pumping was a decision that came in the face of suffocation suffered by advanced countries due to high inflation, largely caused by the rise in energy. After OPEC’s decision, Western countries could see with better eyes what the lifting of sanctions on Tehran and a new nuclear agreement would mean.

A worrying deal

This turnaround becomes a worrying development for consumer nations facing inflationary pressure from energy prices. Crude is at relatively high levels. The barrel of Brent rises around 4% after the OPEC announcement and reaches 96 dollars a barrel.

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However, the most worrying message from this meeting is the shift in OPEC policy. The cartel appears to end production increases and is now focusing on cuts. This turn comes after the price of oil has undergone several weekly corrections due to the risk of recession in advanced countries and, which is the largest importer of oil in the world. Oil imports into China fell 9.7% in July, a trend that greatly worries the cartel.

Oil futures have lost 20% in the last three months on fears of a global economic slowdown. Crude oil, which was trading at $139 at the start of the war, is now below $100.

Although the cut “is inconsequential in terms of volume, it is rather intended to send the signal that OPEC+ is back in price watch mode,” said Bill Farren-Price, director of oil and gas research at Enverus. The group can hope that this movement “is enough to deter short sellers (they bet through derivatives that oil will fall), says this expert.

Russia and Saudi Arabia will produce the same amount of oil

After this decision, things remain like this among the oil-producing countries: as of October, the OPEC members participating in the agreement will jointly produce 26.689 million barrels of oil per day, while the non-OPEC allies they will pump 17,165 million. Saudi Arabia and Russia will both extract 11.004 million barrels per day.

In this way, Russia and Saudi Arabia will produce exactly the same amount of crude. Both countries are the great leaders of this mega-cartel (OPEC +) that produces around 40% of all the oil in the world.

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