Members of OPEC+ are widely expected to announce big cuts in production when they meet in person for the first time since the start of the COVID-19 pandemic. File Photo by Mohamed Messara/EPA-EFE
Oct. 3 (UPI) -- As oil prices fall below highs set early this year and the world's leading economies flirt with recession, analysts said they expect OPEC and their allies to announce deep production cuts when members meet later this week.
Members of the Organization of the Petroleum Exporting Countries and non-member state allies such as Russia meet Wednesday to consider production volumes for November. The group, known as OPEC+, trimmed its production quotas for October by 100,000 barrels per day, a paltry amount considering Saudi Arabia alone exports some 400,000 bpd just to the United States.
It's widely expected that OPEC+ will announce cuts that could be as deep as 1 million bpd, if not more, when they convene for their first in-person meeting at their Vienna headquarters since the start of the COVID-19pandemic.
"The OPEC ministers are not going to come to Austria for the first time in two years to do nothing," Dan Pickering, the CEO of Pickering Energy Partners, told CNBC. "So there's going to be a cut of some historic kind."
Crude oil prices were rallying hard on the news. The price for Brent crude oil, the global benchmark for the price of oil, was up about 5% just before the 9:30 a.m. EDT start of trading in New York to hit $89.44 per barrel.
It set a high-water mark at $133.18 per barrel in early March, just a few short weeks after Russian military forces invaded Ukraine. But even still, high commodity prices are the main force behind the spike in inflation. Central bank policymakers are raising their lending rates in an effort to dampen inflation, but they may press the brakes too hard and push economies into recession.
That in turn would dampen demand so it seems that OPEC+ is looking to strike a delicate balance.
"Hence, they want to pre-empt any possible surpluses," Amrita Sen, the chief analyst at Energy Aspects, told Bloomberg.
Even still, it's a risky bet that could be self-defeating if prices climb high enough to trigger an even greater slowdown in demand, something that already may occur given the lingering fears of a recession.
According to CNBC, banking giant Goldman Sachs expects Brent to hit $100 per barrel in three months and $105 per barrel over a six-month period.