Ministers from the OPEC+ agreement will hold another meeting Wednesday to determine the future plan for oil production. It will be the first time since March 2020 that members of the alliance will meet in person at the OPEC headquarters in Vienna.
At the previous meeting a month ago, on September 5, OPEC+ countries decided to cut oil production in October by 100,000 barrels per day (bpd). The final communiqué then stated that the alliance would return to production levels of August. The document stressed that the decision to increase production by 100 thousand bpd, taken in August, was designed only for September.
Viktor Kurilov, an analyst of the Rystad Energy consulting company in Norway, noted in a conversation with TASS that this decision demonstrates the readiness of the alliance to refuse from constant production increase in order to maintain oil prices at a high level. At the same time, Russian Deputy Prime Minister Alexander Novak following the September meeting said that OPEC+ does not shape any oil price by its decisions, but rather balances the market.
Oil quotes for the OPEC+ decision in September to reduce production in October by 100 thousand bpd, reacted weakly immediately after the meeting, holding at around $90 per barrel. At the same time during September the price of Brent dropped to January minimum - below $83 per barrel. However, amid the news about the possibility of more drastic OPEC+ production cuts quotations returned to the level above $90 per barrel.
Bloomberg reported with reference to sources in OPEC+ delegations that the alliance is considering the possibility of reducing oil production either by 2 mln bpd or in the range from 1 mln to 1.5 mln bpd. Reuters also reported about a possible reduction in production of more than 1 million bpd. If OPEC+ countries agree on such a decision, it would be the most significant production reduction since spring 2020, when the alliance agreed to reduce production by 9.7 million bpd at once amid falling oil demand and falling prices due to the coronavirus pandemic.
In August 2022, OPEC+ countries were supposed to fully restore production to pre-pandemic levels by smoothly increasing production since last August and to exit the restrictions that the alliance had agreed on in the spring of 2020. However, a source in one of the delegations reported TASS that OPEC+ in August fell behind the oil production targets approved for this month by 3.583 million bpd. According to the plan, OPEC + countries were to bring oil production to the level of 43.854 million bpd. Therefore, the actual production level for the month was about 40.3 mln bpd. The 10 OPEC countries participating in the OPEC+ deal accounted for a backlog of 1.399 million bpd, while non-OPEC countries accounted for 2.185 million bpd.
About the upcoming OPEC+ meeting
Production parameters will be traditionally discussed in two stages. First there will be a meeting of the OPEC+ monitoring committee, which will bring together representatives of the eight countries participating in the agreement. The committee's work is administered by Russia and Saudi Arabia, the largest participants of the agreement in terms of production volumes. The meeting will begin at 15:00 MSK. After the meeting of the monitoring committee, the decision on the production level should be approved by all the 23 countries of OPEC+ at a ministerial meeting, the beginning of which is planned for 15:30 MSK. Following that, a press conference is scheduled for the first time since November 2021.
Usually, on the eve of the ministerial meeting of OPEC+ countries, the alliance's technical committee holds its meeting to assess oil market scenarios. The report of the technical committee is the basis for the assessment of the situation at the meeting of the ministerial monitoring committee. This time, the meeting of the alliance's technical panel was scheduled for October 4, but a source in one of the delegations told TASS that it had been cancelled. The source did not explain the reason for the cancellation.
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Based on materials from TASS