July 21, 2024

OPEC cuts output by 100,000bpd in October

Samuel Agbelusi

The Organization of
Petroleum Exporting Countries has agreed to cut crude oil production output by 100,000 barrels per day in October, as part of efforts to support its allies including Russia and Iran

This is coming after Brent crude price dropped below $100 per barrel in August.

Energyday gathered that Brent has now extended its earlier gains, up 3.75% to $96.60 per barrel.

OPEC+ had earlier increased production output by 100,000 barrels per day for August

The meagre increase was generally perceived as a rejection of U.S. Vice President Joe Biden, who had travelled to Saudi Arabia to urge the OPEC leader to increase production in order to lower prices and support the world economy.

The decision to return to August production levels on Monday, according to OPEC+, was made since the upward adjustment was “planned just for the month of September.”

Anouncing the move, OPEC and Non-OPEC Ministerial Meeting noted that the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning.

Opec has also asked its Chairman to consider calling an OPEC and non-OPEC Ministerial Meeting anytime to address any changes in the market if necessary, due to the “higher volatility and increased uncertainties”.

Otherwise, the group will meet on 5th October to set production levels in November.

Recall that OPEC had once slashed production at the start of the pandemic in 2020, but gradually began increasing output as the global economy reopened after the pandemic.

For many months it lifted production by 400,000 bpd, whch increased to 600,000 bpd in July and August.

Since early June, oil prices have decreased by about 25% after reaching multi-year highs in March. Growing worries that interest rate increases and COVID-related limitations in some parts of China could impede global economic growth and reduce oil demand have contributed to the decrease.

The OPEC+ decision on Monday comes amid an intense and intensifying energy disagreement between the West and Russia, which has many people in Europe extremely worried about the possibility of a recession and a winter gas shortage.

Market investors are currently keeping a careful eye on the possibility of an increase in the supply of Iranian oil if Tehran is successful in obtaining a revised version of the 2015 nuclear agreement.

This would, in turn, allow Iran to raise exports and boost tight oil supplies by an estimated 1M barrels or per day – or about 1% of global demand.