OPEC to reduce oil production next month after facing oil price slump

On Monday, OPEC said that they will cut down oil production in order to boost oil prices. Read to know more.

As it prepares for a worldwide economic slowdown to affect demand, OPEC announced Monday that it would reduce oil production next month. This will be the cartel’s first output reduction since the height of the epidemic.

In October, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, which include Russia, agreed to reduce their production targets by 100,000 barrels per day. This output will be decreased in October and is around 0.1 percent of the global demand. They have also revealed that if the need be, they are ready to adjust the production. It all ultimately depends on the situation.

“OPEC is wary of protracted price volatility”: Matthew Holland

Matthew Holland from Energy Aspects said, “OPEC+ is wary of protracted price volatility generated by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential U.S-Iran deal and efforts to create a Russian oil price cap.” 

The OPEC countries believe that this action can stabilize the situation since fuel prices have been so unstable over the past few months. Last month, Saudi Arabia made a suggestion about a potential action, but the formal declaration indicates that all the OPEC members support this course of action.

OPEC decreased its own estimate of the world’s demand for the cartel’s crude oil by 300,000 barrels per day for 2022 and by the same amount for 2023 in its market report from August.

The quick increase in oil demand brought on by the lifting of pandemic restrictions was waning, according to the Paris-based International Energy Agency. It is also predicted that by the fourth quarter of this year, demand would decline to a hardly noticeable 40,000 barrels per day.

The return of Iran as a reliable supplier after a long absence is the other element influencing fuel prices on the market. If the sanctions are lifted, this will result in an increase of approximately 1 million.