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Opec Sends Big Message With Little Cut

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Opec-plus' decision this week to cut its targeted output by 100,000 barrels per day in October — effectively returning to August production levels — will not impact oil balances much. Most members have been producing significantly below target, with preliminary Energy Intelligence assessments for August output showing under-production running at a staggering 3.3 million b/d. As such, the only tangible cuts in real barrels might come from Saudi Arabia, the United Arab Emirates and Kuwait — amounting to a paltry 40,000 b/d. Nevertheless, given current global concerns over high energy prices, the first cut since Opec-plus’ historic Covid-19 response in May 2020 serves as a wake-up call for a market now accustomed to automatic monthly increases. The move also sends a message that producers are willing to use “all of the tools” at their disposal to maintain control of the market, according to the Saudi energy minister. Opec-plus is “attentive, pre-emptive and proactive,” Prince Abdulaziz bin Salman told Energy Intelligence in an interview. The market has been hit lately by excessive “speculative reports and analysis about demand destruction, possible return of large supply volumes, and measures related to price caps, embargoes and sanctions,” he said. The “jury is still out” regarding a possible recession, with “mixed signals” coming from different parts of the world, the minister added. “There has been a tendency towards exaggeration in some of the negative analyses of the global economic situation,” he argued, further noting that: “historical data indicates that you could have recessions with limited oil demand contractions.”

Topics:
Opec/Opec-Plus, Opec-Plus Supply , Oil Supply, Oil Demand, Ukraine Crisis
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