According to the MarketMatrix (Matrix.net), the alliance said it would cut production by 100,000 barrels per day in October as Europe faces an unprecedented energy crisis, as unusually high energy prices have caused a sharp squeeze on the actual purchasing power of consumers around the world.
meeting pointed out that the adverse impact of the decline in volatility and liquidity on the current oil market and needs to support the stability and effective operation of the market. It added that market conditions will be continuously evaluated and ready to adjust output immediately if needed. The decision of
shocked market participants. But most observers believe that the decision is more symbolic and will not have a practical impact on the market. At least three signals were released.
Signal 1: The current price they are not satisfied with
Facts Global Energy president Jeff Brown said:
OPEC+ is basically implying that they don't like the $90 price. They are almost at the limit of capacity, so they will defend high prices. |
Transversal Consulting President Alan Wald said:
Essentially, this is like zero - The amount increased last month is equal to the amount decreased this time, which is equal to the increment of zero for the market. Potential signals are more important than production cuts themselves. I think the symbolic significance of this production cut is more important to the market. Brent crude oil futures prices were pushed so high after the decision was announced. They're basically saying - look, we've been talking about production cuts. The production cut is entirely within our capacity, and we are likely to experience a more significant production cut than this. This also shows that Russia has a considerable influence in OPEC+. |
Signal 2: Will not succumb to external pressure
Janus Henderson Investors analyst Noah Barrett said:
In terms of signal, this move is important because it shows that OPEC+ is paying close attention to demand and trying to manage supply to maintain the lower limit of oil prices. Although some countries have called for OPEC+ to increase supply, their decision has sent a message that they will not succumb to external pressure. |
Lipow Oil Associates president Andrew Lipou said:
This is more like a political neglect of US President Joe Bide and the EU (EU), indicating that OPEC will go its own way and they want to protect those higher prices. But this production cut is quite insignificant. |
Signal 3: Warning the bears The organization can reduce production at any time
. Helima Croft, head of global commodity strategy at Royal Bank of Canada Capital Markets (RBC), said:
is important in symbolic meaning. The group's moves show that they are willing to resume active market management to avoid major selloffs due to concerns about recession or expectations of policy-driven supply increases. Most importantly, we think OPEC+ is making short sellers notice that they won’t give up their recent gains easily and silence gently. |
Commodity strategist at Commerz Bank said:
marginal production cuts are the same as a month of increase, especially since the organization's output is lower than its target in any case, so it actually makes no sense. The producers are undoubtedly saying that they are willing to adjust production in a short time if needed, so they will insist on holding monthly meetings. |
What happened before making this decision?
In fact, before the ministerial meeting, Azerbaijan (AZE), Sudan (SUD), Libya (LBA), Iraq (IRQ), Algeria (ALG), Bahrain (BRN), Kuwait (KUW), Equatorial Guinea (GEQ) and Venezuela (VEN) issued statements expressing support for Saudi Energy Minister Abdulaziz bin Salman's proposal to reduce production to balance the market.
Previously, Prince Aziz warned that the futures market was "in a schizophrenia" because of "extreme" volatility and lack of liquidity, and the market was "in a state of schizophrenia". This price dynamic is disconnected from fundamentals, which may force OPEC+ to take production cuts.
He added that people's sense of security is false when idle capacity is "severely limited" and the risk of interruption remains high.
The next OPEC+ ministerial meeting is scheduled to be held on October 5.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +++ Macro/stock index/crude oil/gold research reports and strategies of top investment banks! +++ In-depth interpretation of economic data/industry reports!
+++ Follow +++ View all resources
