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OPEC Plus Considering Major Production Cut to Prop Up Oil Prices

  • October 02, 2022

OPEC Plus, the oil producers’ group, is considering announcing a major cut in production when it meets on Wednesday, according to a person familiar with the thinking of Saudi Arabia, the group’s de facto leader. Such a move, which analysts say is widely expected, would be a blow to the Biden administration, after it lobbied the Saudis to increase output.

A cut would also mark a major turnaround in policy for OPEC Plus, which includes Russia. Since the group slashed oil production in early 2020 when demand collapsed because of the coronavirus pandemic, the producers have announced a series of steady monthly increases, though they have generally not met those goals.

Analysts say that the Saudis appear determined to bring oil prices up to about $90 a barrel. Oil prices, about $85 a barrel on Friday for Brent crude, the international benchmark, have fallen by roughly a quarter since their June high. After reports of OPEC Plus’s possible cut, prices edged higher in early trading on Sunday night.

“We certainly see a significant chance that the producer group will opt for a substantial cut to try to signal that there is indeed an effective circuit breaker in the market,” Helima Croft, head of commodity strategy at RBC Capital Markets, an investment bank, said last week. Ms. Croft estimated that the group was considering announcing a cut of 500,000 to one million barrels a day, roughly 1 percent of the global supply.

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