Oil prices rose towards the $90 per barrel mark on Thursday on the reports that several major producers of the OPEC+ alliance have started talks about a potential oil production cut ahead of the regular monthly OPEC+ meeting on October 5, according to sources from OPEC+ and OPEC.
Brent crude futures rose 52 cents, or 0.6% to trade at $89.84 a barrel by 1027 GMT, while the US headline crude, the WTI, rose by 52 cents, or 0.6% to trade at $82.67 per barrel, according to oilprice.com.
OPEC+ meets next Wednesday to discuss the market and fundamentals situation as the global oil prices are at a level last seen just before the Russian invasion of Ukraine.
Reuters had reported that a source from OPEC said that the group will likely agree on a production cut but gave no indication of the volumes.
At the previous meeting of the group, OPEC+ reversed the 100,000-barrels-per-day increase for September and returned the October quota to the levels from August.
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While the slight tweak in the group’s collective target is negligible for oil market balances, OPEC+ had indicated its readiness to intervene in the market at any time. The cartel, at the meeting in early September, decided to “request the chairman to consider calling for an OPEC and non-OPEC ministerial meeting anytime to address market developments, if necessary.”
It was reported earlier this week that Russia was likely to propose at the next OPEC+ meeting that the group reduce oil output by as much as 1 million barrels per day from the group’s collective output.
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However, in reality, the output cut would be much smaller, considering that many OPEC+ members, including Russia, are pumping well below their respective targets.
One of the latest estimates put the gap between the quota and actual output widening to a massive 3.58 million bpd in August, with a country like Nigeria struggling to meet a little over 50% of its quota due to oil theft and sabotage.
At any rate, a large cut from OPEC+ next week would support oil prices, and there is growing consensus among analysts that a production cut is coming.
Both crude benchmarks had rebounded in the previous two sessions from nine-month lows earlier in the week, buoyed by a temporary dive in the dollar index and a larger than expected U.S. fuel inventory draw down.
What you should know
Recall that earlier in September, OPEC and non-OPEC partners, an influential energy alliance known as OPEC+, decided to cut production targets by about 100,000 barrels per day from October.
Energy analysts had broadly expected the group to stay the course with its production policy.
In August, OPEC+ agreed to raise oil output by just 100,000 barrels per day. The marginal increase was widely interpreted as a rebuff to U.S. President Joe Biden after his visit to Saudi Arabia to ask the OPEC kingpin to pump more to cool prices and help the global economy.