Informed sources: OPEC Plus is considering further production cuts

According to the report of Fars International Economic Group, Reuters quoted three informed sources, according to the drop in oil prices to $70 per barrel and analysts say that the market is likely to face a new supply surplus, OPEC and its allies on the reduction of oil production. They discuss more, probably up to a million barrels per day.

OPEC+, which consists of the Organization of the Petroleum Exporting Countries and its allies such as Russia, supplies about 40 percent of the world’s crude oil, which means that the group’s decisions on production levels have a large impact on oil prices.

The production cuts discussed are among the options at Sunday’s meeting, the sources said. OPEC ministers meet in Vienna at 2:00 p.m. Before this meeting, OPEC ministers will have a meeting today.

According to these sources, this reduction in production could be one million barrels per day. That is slightly more than the previous 2 million barrels and the voluntary 1.6 million barrels announced in April.

If this production cut is approved, the production cut will reach 4.66 million barrels per day or about 4.5% of global demand.

Two sources familiar with OPEC+ also said they do not expect the group to agree to further production cuts.

Western countries have accused OPEC of manipulating oil prices and undermining the global economy through high energy costs.

In contrast, OPEC officials say, Western money printing over the past decade has fueled inflation and forced oil-producing countries to maintain the value of their main exports.

Iraqi Oil Minister Hayan Abdul Ghani said upon his arrival in Vienna, we will never hesitate to make a decision to achieve more balance and stability (in) the global oil market.

Oil prices rallied by about $9 a barrel to above $87 when OPEC+ surprisingly announced in April that it would further cut output, but quickly retreated under pressure from concerns about economic growth and global demand. .

Saudi Energy Minister Abdulaziz bin Salman said last week that investors who benefit from low oil prices should be careful; Many market watchers interpreted it as a warning of further supply cuts.

But Alexander Novak, the Russian Deputy Prime Minister, told the Russian media that he did not think that a new step would be taken in this meeting.

On the other hand, the International Energy Agency expects the global demand for oil to increase further in the second half of 2023, potentially increasing oil prices.

However, JPMorgan analysts say OPEC has not acted quickly enough to adjust supply to higher levels of US fuel production.

“Demand growth remains strong,” JPMorgan analysts said in a note. Instead, the supply is too high… the alliance (OPEC+) has waited too long to reduce supply. “This group or some members probably need to reduce production further.”

Rapidan Energy Group analysts announced a 40% chance of further decline.

According to these analysts, the group’s ministers are determined to avoid a repeat of 2008, when the sudden collapse of the world economy and financial stability caused the price of crude oil to fall from over $140 to $35 within six months.

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