When the OPEC+ coalition meets this week, it is expected to propose cutting production by more than 1 million barrels per day in order to restore plummeting prices.
A drop of that level would be the largest since the epidemic, while OPEC+ delegates stated that a final decision on the size of the cuts will not be made until ministers meet in Vienna on Wednesday. West Texas Intermediate prices increased by roughly 3%, putting them on course for their first rise in three sessions.
“The oil price decline is likely to be over,” said Ed Moya, senior market analyst at Oanda Group. “Energy traders became pessimistic throughout the summer due to global slowdown concerns, but it now appears that the risks for oil are to the upside.”
Oil decreased by a fourth in the three months to September as the global economy slowed. Banks such as UBS Group AG and JPMorgan Chase & Co. have predicted that the Organization of Petroleum Exporting Countries and its partners will need to cut output by at least 500,000 barrels per day to keep prices stable.
According to Phil Flynn, senior market analyst at Price Futures Group, a drop of more than 1 million barrels per day “would be enough to put a floor under prices.”
Criticism from US
A significant reduction in output may elicit criticism from the United States and other big consumer countries, where energy-driven inflation has led central banks to rapidly raise interest rates. The OPEC+ meeting this week will be the first in-person assembly since March 2020. The group is deciding on November’s supply.
In Asia, China set increased restrictions for fuel exports and crude imports last week in an effort to stimulate its economy, bolstering the positive prognosis for oil. This year, the world’s largest crude importer has seen energy consumption fall due to viral lockdowns and a property collapse.
“It’s only a matter of time before oil returns to $100 a barrel, especially with supplies expected to tighten near the end of the year,” said Suvro Sarkar, an energy analyst at Singapore’s DBS Bank Ltd.
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