Ahead of the “OPEC Plus” talks regarding production cuts, and oil is declining

Oil prices fell slightly in the morning trading today, Wednesday, after rising more than 3% in the previous session, ahead of the meeting of “OPEC Plus” (OPEC +) producers to discuss a significant reduction in crude production. Dealers said that the dollar’s rise was the main reason for the slight decrease in prices; Demand from buyers using other currencies has decreased. Brent crude, the global benchmark, fell 0.46% and reached $91.4 a barrel at 9:00 UTC, after rising $2.94 in the previous session.

US West Texas Intermediate crude futures fell 0.6% to $86.02 a barrel, after rising $2.3 in the previous session. An OPEC source told Reuters that the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia – the so-called OPEC Plus grouping – will meet in Vienna later on Wednesday to discuss production cuts of up to two million barrels per day. This meeting is the first attended by OPEC and its allies since March 2020.

The financial news agency Bloomberg reported that the participants in the meeting were discussing a cut of about two million barrels per day starting next November, double most of the initial expectations. A reduction of this size will be the largest production cut by “OPEC Plus” since demand was affected by the “Covid-19” pandemic in 2020.

An informed source told Reuters that the United States is urging “OPEC Plus” producers to avoid making deep cuts, while President Joe Biden seeks to prevent a rise in gasoline prices in the United States. For its part, AFP quotes Tamash Varga, an expert at BV Energy, as saying, “(The decision to cut) will not be welcomed by the White House with the approach of the mid-term elections next month.” As “City Analysts” said in a note, “If oil prices rise due to large production cuts, this is likely to irritate the (Biden) administration before the US midterm elections.”

Last September, the “OPEC Plus” group slightly lowered its target (by 100,000 barrels) and said it was ready for a further reduction. Since then, the price of the two global benchmarks has fallen and returned to levels last January, far from the rise recorded last March at the beginning of the war in Ukraine, when the price of Brent reached $139.13 a barrel and West Texas Intermediate crude oil $130.50.

Meanwhile, Vitol’s executive committee member Chris Beck and chairman of VTTI’s board of directors said Wednesday that he expects Brent crude to approach $100 a barrel by the end of the year. Beck added that the market value of Brent crude ranges between 80 and 100 dollars per barrel.