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The Organization of Petroleum Exporting Countries and its allied nations (OPEC+) have agreed to pare oil production by 100,000 barrels a day, beginning next month.
While the cut is largely symbolic, it underscores the group’s concern over softening oil demand amid a global economic slowdown and highlights last month’s comment by Abdulaziz bin Salman, Saudi Arabia’s oil minister, that the coalition can manipulate production as it pleases.
As the post-COVID economic recovery boomed, oil prices shot to more than $120 a barrel in June.
Since then, the world’s slowing economic activity has dropped prices back below $90. Brent crude’s price recovered to $94.26 on 12 September.
The unexpected move by OPEC+ bumped benchmark Brent crude’s price up as much as 3.3 percent to $96.50 last week, with West Texas Intermediate, which sets U.S. oil prices, gaining 3.7 percent to $89.79 last week and settling back to $87.98 on 12 September.
The slight cut “may seem negligible, but the message from today’s cut is clear: OPEC+ thinks [oil prices] have fallen enough,” Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy, tweeted after the group’s announcement.
TREND FORECAST: OPEC+’s move is a political statement, reminding the world that it will adjust oil production up or down as it pleases, depending on global demand and its own members’ needs.
For now, oil prices will remain volatile. Europe is attempting to impose a price cap on Russian oil; in response, Russia might end all oil deliveries to the region, which likely would spike Brent prices.
In contrast, a slowing global economy will cut demand and oil’s price along with it.
Russia’s war in Ukraine and resulting Western sanctions remain a wild card.