OPEC+ to Discuss Potential Supply Cut Amid Oil Demand Concerns

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(Bloomberg) — OPEC+ will discuss options including an output cut of 100,000 barrels a day at its meeting on Monday, a delegate said, as concerns about a weakening economy and slowing demand come to the fore. 

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While the alliance of oil producers is widely expected to hold output steady for now, Saudi Energy Minister Prince Abdulaziz bin Salman has warned that fresh cuts could be necessary because crude futures, which fell 12% in London last month, have become detached from the realities of supply and demand.

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If the Organization of Petroleum Exporting Countries and its allies do decide to maintain production at current levels, the final communique from the meeting could still signal their readiness to curb output in the near future if necessary, a delegate said, asking not to be named because the information is private. 

After spending two years gradually feeding idle oil production back into the post-pandemic world, OPEC+ faces a different market. The narrative that’s dominated the last few months — pressure from key consumers like the US to tame inflation by ramping up supply — is shifting toward concerns about a global economic slowdown. 

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Oil prices have just experienced their longest decline since 2020, imperiling the unprecedented windfall enjoyed by the Saudis and their partners. China, the biggest oil importer, has exhibited signs of an “alarming” economic slowdown, while the US has skirted close to recession. Meanwhile, there’s been a resumption of nuclear talks that could revive crude flows from OPEC member Iran.

Cutting production could be a politically sensitive move for OPEC+. It would reverse the output hike announced by the cartel just a month ago as a gesture to President Joe Biden. The US leader has made lowering oil prices a policy priority and gambled his credibility in July with a landmark visit to Saudi Arabia, where he greeted Crown Prince Mohammad bin Salman with a symbolic fist-bump of reconciliation after years of estrangement over the kingdom’s human rights record.