The OPEC+ group of oil-producing countries has agreed to reduce its total oil production by 100,000 barrels per day (bpd), essentially reversing last month’s modest increase in production.
Although the crude oil markets have remained relatively tight, the price of Brent Crude has dropped from $120 in June to about $95, despite the ongoing war in Ukraine and sanctions on Russian oil. The return of lockdowns to China and recessionary fears have also been dampening price expectations. There is also a chance that the Iranian nuclear deal may be revived, opening the way for Iran to add a further million bpd of crude oil to the markets.
Energy Aspects’ Matthew Holland said to Reuters about this:
“OPEC+ is wary of protracted price volatility generated by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty over a potential US–Iran deal and efforts to create a Russian oil price cap.”
Saudi Arabia recently floated the idea of cutting production to limit any wild fluctuations in the market. The latest move by OPEC+ is seen as a signal of its willingness to protect prices, with it possibly preferring that prices remain above $90.
The OPEC+ group includes the 13 OPEC member countries, plus 11 other oil-producing countries, most notably Russia. Its decisions do not affect other countries like the US, where operators such as Chevron, the maker of the Texaco lubricant range, are not constrained by quotas. Indeed, the White House recently reaffirmed the US President’s commitment to securing the energy supply and bringing down prices.