Sources say OPEC + is considering the biggest cuts since the 2020 crisis

LONDON (Reuters) – The OPEC+ group of oil producers is discussing production cuts of more than 1 million barrels per day, and voluntary cuts for individual members may come on top of that, making it the biggest cut since 2020, OPEC sources said.

The group is set to meet on October 5 in Vienna – in person for the first time since March 2020 – against the backdrop of lower oil prices and months of extreme market volatility that prompted Saudi Arabia, the largest producer in OPEC +, to say the group could cut production.

OPEC+, which includes OPEC countries and allies such as Russia, is gradually increasing its production target to cancel record cuts it made in 2020.

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But it is now facing a sharp decline in prices, which have fallen below $90 a barrel from a high of $120 in recent months due to concerns about the global economy and the recovery of the US dollar after the Federal Reserve raised interest rates.

“It could be as important as the April 2020 meeting,” the source said, referring to a time when OPEC + agreed record supply cuts of about 10 million barrels per day, or 10% of global supply, as the Covid-19 pandemic slashed demand.

The big cut is likely to anger the United States, which is pressuring Saudi Arabia to keep pumping more to help drive down oil prices and reduce revenue for Russia as the West seeks to punish Moscow for sending troops to Ukraine.

What the West describes as an invasion the Kremlin calls a special military operation.

Saudi Arabia has not condemned Moscow’s actions amid difficult relations with the administration of US President Joe Biden.

The emblem of the Organization of Petroleum Exporting Countries (OPEC) in Vienna March 16, 2010. REUTERS/Heinz Peter Bader/File Photo

Last week, a source familiar with Russian thinking said Moscow would like to see OPEC+ cut its production target by 1 million barrels per day, or 1% of global supply.

On Sunday, sources said the cut could exceed 1 million barrels per day.

An OPEC source said on Monday that voluntary cuts to individual members would come on top of that number.

It is not yet clear what levels of voluntary cuts Saudi Arabia or any of the major Gulf OPEC producers can contribute.

In the past few years, only Saudi Arabia has offered voluntary cuts to give markets an extra boost.

“My instinct is that if they (OPEC +) propose to cut prices and prices continue to fall, they will have to do it and bigger than they want,” said Raad Al-Qadri, managing director of Eurasia Group.

Stephen Brennock, of PVM, said fears of a recession denting demand have bothered OPEC+, so it is ready to take precautionary measures.

“It must be noted that OPEC + is already pumping more than three million barrels per day less than its target, and therefore any further cuts will only exacerbate the current supply tightness,” he said.

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Reuters OPEC Report, Newsroom; Editing by David Goodman and Louise Heavens

Our criteria: Thomson Reuters Trust Principles.

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