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OPEC+ aims to put a jittery oil market on notice with talk of big production cuts

Highlights

Ministers in Vienna for first in-person meeting since March 2020

Prices weighed down by recession fears, strong US dollar

OPEC+ alliance could also extend agreement beyond 2022

  • Author
  • Herman Wang    Robert Perkins    Rosemary Griffin
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  • Alisdair Bowles
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  • OPEC+ Oil Output Cuts

OPEC and its allies are prepared to substantially scale back production to bolster slumping oil prices, according to people close to the matter, although ministers were tight-lipped on their intentions as they began arriving in Vienna Oct. 4 for their first in-person talks in two and a half years.

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The 23-country alliance could announce a cut up to 2 million b/d in November at its meeting Oct. 5, but how they would be divvied up remains a question.

As the main countries produce at or near their quotas, Saudi Arabia, the UAE and Kuwait would have to bear the biggest burdens of removing actual physical barrels from the market. Almost every other member is so severely underproducing their quotas that, unless their targets are dropped drastically, their contributions to the cuts would only be on paper.

Saudi energy minister Prince Abdulaziz bin Salman declined to comment on arrival in the Austrian capital, beyond remarking on the weather, while UAE counterpart Suhail al-Mazrouei said it was too early to assume any outcome from the meeting.

"There is a process. We will have to listen to the technical team [and] look at the market, and depending on that, we will take the decision," he told reporters.

Kuwaiti oil minister Mohammed al-Fares also had no comment, although he told the official Kuna news agency before flying to Vienna that the OPEC+ alliance was closely monitoring the oil market and that any decision would "ensure energy supplies in the interest of producers and consumers alike."

OPEC+ pumped 3.6 million b/d below quotas in August

Short-term fears

Crude oil futures rose in anticipation of the OPEC+ decision, with the ICE December Brent contract at $91.95/b, up $3.09 from the previous close, as of 1805 GMT.

Platts assessed the Dated Brent physical crude price at $93.73/b on Oct. 4, up 10.8% from $84.63/b Sept. 26, when rumors of an OPEC+ cut began swirling. But the benchmark is still down from a June 14 peak of $132.06/b, amid market concerns over a global recession.

The strong US dollar has also weighed on commodity prices.

Related Infographic: Strong ruble weakens Russia's position in OPEC+ negotiations