Sources say OPEC+ is considering deepest cuts since 2020 crisis

LONDON (Reuters) – Oil producer group OPEC+ is discussing production cuts of more than a million barrels a day, and voluntary cuts for individual members could add to that, making it the most significant reduction since 2020, OPEC sources said.

The group is due to meet on October 5 in Vienna – in person for the first time since March 2020 – amid falling oil prices and months of extreme market volatility that have pushed Saudi Arabia, the largest OPEC+ producer, to say the group could cut production.

OPEC+, which includes OPEC nations and allies such as Russia, is gradually increasing its production target to reverse the record cuts it made in 2020.

But it is now facing a sharp drop in prices, which have fallen below $90 a barrel from a high of $120 in recent months on concerns about the global economy and the recovery of the US dollar after the Reserve federal government raised interest rates.

“It could be as big as the April 2020 meeting,” the source said, referring to a time when OPEC+ agreed to record supply cuts of around 10 million barrels per day, or 10 % of global supply, as the Covid-19 pandemic has reduced. request.

The sharp cut is likely to anger the United States, which is pressuring Saudi Arabia to keep pumping more to help lower oil prices and squeeze Russia’s revenue as the West seeks to punish Moscow for sending troops to Ukraine.

What the West describes as an invasion, the Kremlin calls it a special military operation.

Saudi Arabia has not condemned Moscow’s actions amid rocky relations with US President Joe Biden’s administration.

Last week, a source close to Russian thought said Moscow would like to see OPEC+ cut its production target by 1 million barrels per day, or 1% of global supply.

On Sunday, sources said the reduction could exceed 1 million barrels per day.

An OPEC source said Monday that voluntary cuts by individual members would add to that number.

It is not yet clear what levels of voluntary cuts Saudi Arabia or any of the major OPEC Gulf producers can contribute.

In recent years, only Saudi Arabia has offered voluntary cuts to give markets an extra boost.

“My instinct is that if they (OPEC+) offer to lower prices and prices continue to drop, they will have to do it and bigger than they want,” said Raad Al-Qadri, chief executive. of Eurasia Group.

PVM’s Stephen Brennock said fears of a recession weighing on demand have bothered OPEC+, so it is ready to take precautionary measures.

“It should be noted that OPEC+ is already pumping over three million barrels per day below its target, and so any further cuts will only exacerbate the current supply crunch,” he said. declared.

Reuters OPEC Report, Newsroom; Editing by David Goodman and Louise Heavens

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