OPEC+ producers appear prepared to reduce output when they meet on Wednesday, in order to reduce supply in an oil market that energy firm executives and analysts say is already constrained due to strong demand, a lack of investment, and supply issues.
Due to concerns about a worldwide economic slowdown, rising U.S. interest rates, and a stronger dollar, oil prices have fallen to approximately $90 from $120 just three months ago. The probable OPEC+ cut might help them rise again.
According to insiders from the organization, OPEC+, which also includes Saudi Arabia and Russia, shocked the market by proposing output cuts greater than one million barrels per day (bpd).
Also, Saudi Arabia and the other OPEC+ members have stated that they aim to reduce volatility and do not have a specific oil price in mind.
According to Norbert Rucker, head of economics at Julius Baer, “Such a move would be difficult to justify fundamentally, as the oil market suffers everything but a glut.”
Moreover, the tensions with oil consumers are rising as the petro-nations appear inclined to use their influence to artificially prop up oil prices.
Top oil industry leaders claimed that despite supply limits on the global oil market, oil demand is still high.
Amin Nasser, the CEO of Saudi Aramco, claimed that the oil market is not paying attention to the fact that there is little global spare capacity to increase oil output.
Nasser stated at the Energy Intelligence Forum in London on Tuesday that “the market is focusing on what would happen to demand if recession hits in different regions of the world, they are not focusing on supply fundamentals.”
Speaking at the same conference, Shell Chief Executive Ben van Beurden stated that current prices do not easily convert into a change in capital allocation because oil and gas projects might take decades to produce and begin paying off.
