OPEC and its allies led by Russia on Monday agreed to a small oil production cut to strengthen oil prices that have slid on fears of an economic slowdown.
The world’s most powerful oil producers have decided to slash output by 100,000 b/d amounting to only 0.1% of global demand, for October. They also agreed that OPEC’s leader Saudi Arabia could call an extraordinary meeting anytime if volatility persists.
OPEC’s decision comes amid energy crisis in Europe, which is concerned about the prospect of recession and a winter gas shortage.
Commenting on the agreement, Saudi Energy Minister Prince Abdulaziz bin Salman said, “This decision is an expression of will that we will use all of the tools in our kit,” adding that OPEC+ will be “attentive, preemptive and pro-active” to support the stability of the market.
According to Bloomberg, the output cuts came as a surprise for many traders, who had expected the OPEC group to hold production steady as oil prices above $90 a barrel squeeze consumers. The market also looks set to get even tighter in the coming months as the EU imposes sanctions on Russian exports.
Last month, OPEC+ agreed to raise oil output by only 100,000 barrels per day, which experts said was a rebuff to U.S. President Joe Biden after his visit to Saudi Arabia to ask the OPEC’s largest producer to pump more to cool prices and help the global economy.
OPEC+ said in a statement that Monday’s decision to revert back to August levels of production was because the upward adjustment was “intended only for the month of September.”
The next OPEC+ meeting is scheduled for Oct. 5.