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Source: e-company
OPEC decided to reduce crude oil production, stimulated by the news that international crude oil prices rose to a high level on October 6, and the market is waiting for more production cuts and the United States to deal with details.
OPEC+ decided to reduce production
On October 5, the 33rd ministerial meeting of the Organization of Petroleum Exporting Countries and the non-OPEC oil-producing Countries was held in Vienna, Austria. The meeting decided to reduce the total crude oil output by 2 million barrels per day from November.
According to statistics, this production cut will set the largest production cut of OPEC oil since the COVID-19 pandemic, equivalent to about 2% of global oil demand, and its validity period may be extended to December 31, 2023.
Russian Vice Prime Minister Novak also said Russia may cut oil production to offset the impact of the West imposed price cap on Russian oil. According to media reports, Russia will produce 530 million tons of oil in 2022 and 490 million tons of oil in 2023; and said that Russia's oil production is 9.9 million barrels per day, and the oil price of US$70 per barrel is acceptable.
However, the Iraqi Ministry of Petroleum commented on the OPEC+ oil production cut agreement, pointing out that Iraqi oil exports will not be affected by the latest tillage agreement.
This OPEC+ agreement was reached before the ban on Russian oil imports came into effect by the EU . The market is worried that this move will exacerbate supply tensions and push up inflation. Therefore, oil-producing countries' choice to cut production and insure prices has attracted criticism from the United States and other aspects, and the United States said it will take measures to suppress oil prices.
White House website issued a statement on the 5th saying that the US Department of Energy will continue to release its strategic crude oil reserves in November. In addition, U.S. President Biden asked U.S. energy secretary to seek additional measures to increase domestic crude oil production. According to statistics, the United States' strategic oil reserves have now dropped to its lowest level since 1984.
Oil prices have further rebounded from the stage lows hit in September, but the latest uptrend has stopped, and the market is waiting for detailed data on how OPEC+ will cut production on a large scale and how the United States will respond. On October 6, the price of NYMEX crude oil futures once hit $88.66 per barrel, but then fluctuated downward. The price of Brent crude oil futures also showed a similar trend, with the highest rise to $94.45 per barrel, and the latest decline was 0.34%.
Global economic recession has caused market concerns
For OPEC+ production cuts, market analysis is expected to tighten crude oil supply, push up oil prices, and is even expected to return to the level above US$100 per barrel.
Goldman Sachs believes that considering the supply shortage, the actual scale of OPEC's production cut is about 500,000 barrels per day, and the bank will still raise its fourth-quarter oil price target to $110 a barrel.
Citi analysts pointed out in a report that production cuts will keep global inventory presence low for a longer period of time and tighten the market in 2023. In addition, global exchange-traded fund provider - Global X fund analyst Reddy expects that production cuts may push oil prices back to the level of $100 per barrel, but as the market digests relevant economic data, oil prices may be between $90 and $100 per barrel in the short term.
Considering the influence of geopolitical and seasonal factors, oil prices are expected to strengthen this winter. On the other hand, the actual impact of OPEC+ countries in production cuts remains to be seen.
Currently, the output of some member countries is below the current target level, and the actual output reduction will be less than the 2 million barrels per day agreed at the meeting. More than half of the actual production cuts are expected to come from the world's largest exporter, Saudi Arabia , analysts at RBC Capital said.
Saudi Energy Minister Abdulaziz bin Salman said that the actual production cut this time is about 1 million to 1.1 million barrels per day, which is a response to the sharp rate hike of Western countries and the weak global economy.
USD strengthening is also believed to weaken the impact of oil production cuts. Fed aggressively raised interest rates by 75 basis points in September and released a hawkish signal, significantly pushing up the dollar index , and is expected to limit the price of crude oil. In addition, weak global economic growth is expected to limit the outlook for oil demand.
Latest data shows that German manufacturing orders fell by the largest month-on-month in August, down 2.4% month-on-month, down 4.1% from the same period last year, while analysts originally expected a month-on-month increase of 0.7%. As the outbreak of the Russian-Ukrainian conflict led to the EU sanctions on Russian energy, Germany's economic outlook became increasingly deteriorating, and demand in other regions of the euro zone also tended to weaken; Australia's trade surplus further declined in August, and Australia's major commodity exports were hit due to slowing global economic activity.
Editor: Ye Shuyun
Proofreading: Gaoyuan
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