In response to a nearly 20% drop in oil prices since late September, OPEC+ is set to deliberate on the possibility of implementing additional oil supply cuts during its upcoming meeting on November 26 according to Reuters.
Concerns about demand and the potential for a surplus next year have contributed to oil prices sliding to around $79 a barrel for Brent crude.
Saudi Arabia, Russia, and other OPEC+ members have already committed to total oil output cuts of 5.16 million barrels per day, equivalent to about 5% of daily global demand, starting from late 2022. The existing curbs, which include 3.66 million bpd by OPEC+ and supplementary voluntary cuts by Saudi Arabia and Russia, may be reconsidered as one OPEC+ source suggested that the current measures might not be sufficient, according to Reuters.
“It is not pleasant to see that market volatility is greater ahead of the next meeting while fundamentals overall remain solid. Ministers are likely to express some thoughts on what to do more, to secure a stable trend,” noted one of the OPEC+ sources.
While three sources indicated that deeper cuts could be on the table, two others suggested it was premature to confirm whether further reductions would be discussed. OPEC+ does not have a target for oil prices, and members depend on oil as a primary source of government income.
Analysts have warned that Saudi Arabia’s extension of oil cuts raises the risk of economic contraction this year. Saudi Arabia, emphasizing strong compliance with cuts, previously pledged a voluntary production cut of 1 million bpd, extended until the end of 2023.
As the OPEC+ meeting approaches, the oil market awaits decisions that could shape the trajectory of oil prices and influence global economic dynamics.