VIENNA/LONDON, Oct 5 (Reuters) – OPEC+ looks set to cut its oil output targets deeply when it meets on Wednesday, despite pressure from the United States and other countries to curb supply in an already tight market.
The OPEC+ cuts could spark a recovery in oil prices, which have fallen from $120 to $90 three months ago on fears of a global economic slowdown, rising U.S. interest rates and a strong dollar.
OPEC+, which includes Saudi Arabia and Russia, is working on cutting 1-2 million barrels per day, the sources told Reuters.
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The U.S. is urging OPEC not to pursue cuts arguing that fundamentals do not support them, a source familiar with the matter said. read more
The sources said it was unclear whether the cuts could include additional voluntary reductions by members such as Saudi Arabia, or whether the cuts would include the group’s current low production.
OPEC+ fell about 3.6 million bpd short of its production target in August.
Washington’s reaction
“If higher oil prices are driven by significant production cuts,
“Ahead of the US midterm elections, it will irritate the Biden administration,” Citi analysts said in a note.
“There could be further political reactions from the US, including additional releases of strategic stocks and some wild cards, including further development of the Nopec bill,” Citi said, referring to the US anti-trust bill against OPEC.
JPMorgan also said it expects Washington to retaliate by releasing more oil stocks.
Saudi Arabia and other members of OPEC+ — the Organization of the Petroleum Exporting Countries and other producers, including Russia — have said they seek to curb volatility rather than target a specific oil price. read more
Benchmark Brent crude oil rose on Tuesday and traded below $92 a barrel on Wednesday.
The West has accused Russia of weaponizing energy, creating a crisis in Europe that could strain gas and electricity supplies this winter.
Moscow accuses the West of weaponizing the dollar and financial systems like SWIFT in retaliation for Russia sending troops into Ukraine in February. The West accuses Moscow of invading Ukraine, while Russia calls it a special military operation.
While Saudi Arabia has not condemned Moscow’s actions, the loss of oil revenue to Moscow is one of the reasons Washington wants to lower oil prices.
Ties have strained between Biden’s kingdom and administration, which has traveled to Riyadh this year, but failed to secure pledges of firm cooperation on energy.
“This decision is technical, not political,” UAE Energy Minister Suhail Al-Masrouei told reporters.
“We will not use it as a political system,” he said, adding that worries about a global recession would be one of the main topics.
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Editing by David Gregorio and Jason Neely
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