OPEC+ seen considering deeper supply cuts as market falters

OPEC and its allies are expected to consider deeper supply curbs when they meet this weekend against the backdrop of a faltering global oil market.

Saudi Arabia and its partners surprised traders — and drew a fierce rebuke from President Joe Biden — when they announced a two million barrel-a-day cutback last month. Even so, prices have since weakened, briefly slipping to almost $80/bbl in London as the situation in China deteriorates.

Delegates from the group, who until this week had predicted they would pause to assess the impact of the cuts, now say additional reductions could be an option. Discussions within the alliance haven’t yet formally got underway before the Dec. 4 meeting.

Riyadh already sent the market an unusually clear pre-meeting signal. Last week, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ was “ready to intervene” with further supply reductions if it was required “to balance supply and demand.”

“OPEC will probably choose between rollover or further cuts,” said Amrita Sen, chief oil analyst and co-founder of consultant Energy Aspects Ltd. They “are always vigilant about supply-demand balances.”

Ten of 16 traders and analysts surveyed by Bloomberg this week anticipated a new supply cutback, with estimates ranging from 250,000 to two million barrels a day. Consultants FGE predict the cutback may be at the upper end of the range.

© 2022 Bloomberg L.P.

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