In a media release, OPEC and its partners under the OPEC+ banner said they agreed to "revert to the production level of August 2022 … for the month of October." It was a complete turnaround from the collective's earlier decision to increase oil production for September by 100,000 bpd. The release also stated that OPEC has plans to reconvene on Oct. 5 and could meet again anytime, if necessary, to "address market developments."
According to the Wall Street Journal, the Sept. 5 announcement was OPEC's first oil production cut in more than a year. It followed a 25 percent drop in crude oil prices for the last three months. As a result, petroleum prices increased by about three percent on the same day the production cut was announced.
The Associated Press reported that Prince Abdulaziz Bin Salman, Saudi Arabia's energy minister, said OPEC+ nations could cut oil production at any moment. Members of the group expressed worry that a profitable renewal of the U.S.'s 2015 deal with Iran could see a flow of Iranian oil hit the market. Javad Owji, the Iranian minister of petroleum, said the worldwide energy market needs a boost in the form of oil from the Islamic republic.
Aside from Iran's potential entry, OPEC+ members expressed concern that a global recession – driven by soaring inflation, energy troubles in Europe and pandemic-related economic downturn in China – could reduce oil demand.
OPEC+ members slashing production include Riyadh, Moscow
The 100,000 bpd reduction by OPEC+ amounted to only 0.1 percent of worldwide demand. According to OANDA Senior Market Analyst Craig Erlam, OPEC+'s earlier decision to increase production was not seen as a huge deal.
"It's the symbolic message the group wants to send to the markets more so than anything," he said. "What we've probably seen from the markets was pricing in most of the worst-case scenario."
Saudi Arabia based its decision to drop petroleum output on what it perceived as excessive oil price drops. However, it was not the only OPEC+ member announcing production cuts as Russia followed suit.
According to Russian Deputy Prime Minister Alexander Novak, anticipations of fragile worldwide economic growth played a role in Moscow following Riyadh's decision to slash oil output. A report by the TASS news agency quoted Russian Energy Minister Nikolai Shulginov, who remarked that the country would most probably decrease its oil production by around two percent this year.
Analysts predicted that the use of oil to generate power will increase. The prediction came amid Russian state-owned Gazprom saying it would halt pumping gas through the Nord Stream 1 pipeline because of a leak.
In August, the International Energy Agency elevated its oil demand prediction for the year, partially because it anticipates gas-to-oil shifting in some nations due to record natural gas and electricity prices.
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