Home / News / World /  OPEC+ agrees on 2 million barrel per day output cut to support oil prices

The Organization of Petroleum Exporting Countries and its allies (OPEC+) have agreed on the recommendation to collectively trim the output limit by 2 million barrels per day to support crude oil prices. On Wednesday, crude oil prices eased amidst the deep cut in supply output. The 45th meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 33rd OPEC and the non-OPEC ministerial meeting were held on October 5th in Vienna, Austria.

The JMMC members had recommended a 2 million barrels a day cut in the output limit ahead of the OPEC+ ministerial meeting. 

Delegates told Bloomberg that OPEC+ agreed to cut its collective output limit by 2 million barrels day as the group seeks to halt a slide in oil prices caused by the weakening global economy.

Earlier, the news agency had reported that such would have a smaller impact on global supply than the headline number suggests because several countries are already pumping well below their quotas. Simply put, they would already comply with OPEC+ new limits without having to cut production.

As per Bloomberg's calculation based on September output numbers, the cut of 2 million barrels a day in the group’s output target, shared pro rata -- would require just eight countries to trim their actual output and that will lead to a real reduction of 880,000 barrels a day.

However, notably, the 2 million barrel cut will still be the largest cut by OPEC+ since 2020. Such is expected to be another shock to the global economy which is already impacted by multi-year high inflations with central banks firefighting the consumer price by monetary policy tightening. Also, the move is announced amidst high energy costs.

In another report, sources told Reuters that the United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals don't support them. Further, the sources pointed out that it remained unclear if cuts could include additional voluntary reductions by members such as Saudi Arabia, or if they could include existing under-production by the group.

In August, OPEC+ was short by 3.6 million barrels per day of its output target.

Currently, US WTI and Brent Crude are marginally up and trading near $86.5 per barrel and a little over $92 per barrel.

 

 

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