CEM REPORT, OIL & GAS | OPEC+ has agreed to cut production by 2 million bpd after group met in Vienna on Wednesday to discuss oil output cuts for November.
The meeting of Energy ministers from the OPEC cartel and allied non-members, including Russia, is the first since the start of the COVID-19 pandemic in early 2020.
Though some countries such as Russia and Nigeria are producing below quota, the group’s Agreement to cut oil production follows a drop in oil prices to about $90 a barrel from $120 three months ago due to fears of a global recession.
Earlier production targets of 26.689 million bpd and target of 17.165 million bpd by OPEC and non-OPEC members of OPEC+ has not been meant. A further 2 million per day cut target would mean that actual production cut will be smaller than the 2 million bpd quota cut.
It also mean that countries that have not met their quota will level up according to their present production volume since OPEC sources suggested shortly after the meeting concluded that the 2 million bpd would be cut from “current baselines”, with no adjustments made today to the individual country baselines.
Ahead of Wednesday meeting, there were speculations that production cut would not exceed 1 million barrel per day in view of the following output, the increment it would have on price of petrol and consequent impact it would have on cost of transportation.
“If the group cuts target production by 1 million barrels per day, actual output would likely drop by about 550,000 barrels per day as countries like Russia or Nigeria that are producing below quota would see their formal target decline but remaining above what they can currently produce,” Campanella said.
As reported by Aljazeera, impact on petrol price was the position of US for pushing OPEC not to proceed with the cuts, arguing that fundamentals don’t support them, a source familiar with the matter said. “The White House wants to avoid an increase in petrol prices for US drivers just ahead of congressional elections in November.”
All efforts by Joe Biden to prevent OPEC from stamping the cuts has failed, we all await the impact in the coming days on crude and gasoline prices.
Already, oil prices have responded to the cut as prices rose on Wednesday. Brent crude was up 28 cents, or 0.3%, at $92.08 a barrel at 1351 GMT, while U.S. West Texas Intermediate (WTI) crude rose 7 cents, or 0.1%, to $86.59 a barrel. Both contracts rose sharply in the last two days.
While US dread hike in price of petrol, countries like Nigeria that is fuel import dependent is sure to have a more striking impact on its foreign reserve and cost of subsidizing local fuel consumption which already gulping much