The Opec+ coalition has agreed to cut its October crude production target by 100,000 b/d, marking a return to August quotas.
The proposal to cut was endorsed earlier today by the group’s Joint Ministerial Monitoring Committee (JMMC). The decision comes against a backdrop of global recessionary fears and internal group discontent over a perceived disconnect between a tight physical market with limited spare capacity and falling futures prices.
After today’s meeting, Russian deputy prime minister Alexander Novak said the October cut is linked to concerns about the outlook for global economic growth. “Previously [the world economy] was predicted at a level of 3.5pc growth, now the percentage is lower, somewhere around 3.1pc,” he said, according to Russian state news channel Ria Novosti.
“As part of our agreement, we decided to slightly adjust the quotas, thereby once again showing, among other things, that we have a fairly flexible tool,” Novak said. “It can take into account both the need to increase production and reduce production.”
The token 100,000 b/d reduction will reverse a 100,000 b/d increase for September and probably offer symbolic guidance to the market, but it will have limited effect on physical supply. The alliance as a whole was 2.892mn b/d short of its July quotas, with members facing dwindling capacity, underinvestment, infrastructural collapse and sabotage. The combined output target was then raised by a further 648,000 b/d in August to fully unwind the cuts the coalition implemented in response to the Covid-19 pandemic in May 2020.
The gap between pledged and delivered output could widen further, given western efforts to limit Russian oil revenues through sanctions. The G7 group on 2 September vowed to cap prices for Russian crude sold to third countries, after the EU stops Russian seaborne imports on 5 December.
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