(Photo credit: Reuters)
OPEC and major non-OPEC producers — also known as OPEC+ — are meeting on 5 October in Vienna to discuss a possible cut of 1 million barrels per day, according to sources that spoke to Reuters.
Oil traded shortly above $129 per barrel in 2022, its highest price since 2008, partially fueled by the war in Ukraine and aggressive western sanctions against Russia.
However, the fear of a global economic crisis has sent prices back by 25 percent since June.
“The OPEC ministers are not going to come to Austria for the first time in two years to do nothing. So there’s going to be a cut of some historic kind,” said Dan Pickering, CIO of Pickering Energy Partners, in an interview with CNBC News.
The news caused oil prices to rise by 4 percent on Monday.
According to the New York Times, analysts have argued that Saudi Arabia is determined to bring the price back above the $90 benchmark.
“We certainly see a significant chance that the producer group will opt for a substantial cut to try to signal that there is indeed an effective circuit breaker in the market,” Helima Croft, head of commodity strategy at RBC Capital Markets, said last week.
Experts believe Wednesday’s meeting will announce a cut of 500,000 to 1 million barrels per day.
With the expected announcement, Joe Biden’s visit in mid-July to Saudi Arabia has proven to be highly fruitless. After taking an aggressive stance against Crown Prince Mohammed bin Salman over his role in the murder of Washington Post columnist Jamal Khashoggi, Biden set his campaign promises asidez to bring the kingdom back on course and increase output to put an end to rising prices.
However, it is not just the looming threat of an output decrease that puts Washington and its allies on edge.
The EU’s sanctions on seaborne imports of Russian crude oil are also expected to kick in by December, putting further pressure on low supply and high price action.