OPEC+ Addresses A Decline In Oil Production

There are several factors that are conditioning the price of oil in recent days. The movements of the central banks depress the market, which affect the drop in global demand forecasts and, therefore, sink the price of crude oil, which has come to quote at levels not seen since January -before the Russian invasion from Ukraine-. A price that is not attractive for the Organization of Petroleum Exporting Countries and its associated partners (with Russia to its credit) as they have already stated on previous occasions.

On October 5, the crude cartel meets again with the Brent barrel, a benchmark in Europe, bouncing 6.5% from the 84 dollars that it drilled on September 27, although it remains below 90 dollars. And it is not ruled out that OPEC + announces a substantial cut in its production at this meeting.

Already in the previous meeting, the cartel changed its roadmap from a slow but progressive increase in crude oil pumped -in line with the recovery after the coronavirus pandemic- to the slight cut announced in early September (of 100,000 barrels per day during September). . A modest but symbolic cut that shows that the organization is willing to further cut black gold production if the price of oil does not recover or demand continues to drop.

In a survey conducted by Bloomberg of 16 operators, all but one agree that OPEC+ will cut production in October. And firms like UBS or JP Morgan dare to forecast a cut of half a million barrels per day – compared to the 400,000 that have been increasing every monthuntil last August. Moreover, sources included in the same study assure that Russia would have asked its partners to increase the cut to one million barrels.

The country has benefited to date from the context of high prices, despite the fact that the crude oil sold to the rest of the Western countries has decreased in the year due to the sanctions imposed. And it is that Putin seeks to squeeze the price of his crude oil before the total European veto becomes effective at the end of this year and Russia has to find another partner to buy oil from him. In fact, on Tuesday the Ecofin meets where the European Union economy ministers will address precisely the energy situation in the common area and will assess the repercussions of the war in Ukraine.

At the moment, the market is already taking into account the rise in OPEC+ and even so, the consensus expects Brent to close the last quarter of the year at 85 dollars , with the average for 2022 below 100 per barrel taking into account the level of inventories in the US and the strength of the dollar against the rest of world currencies and as a favorite haven asset for investors.

Keys to central banks
The coming week will not be loaded with central bank decisions like the second half of September. Only the Fed of New Zealand will review interest rates in the country, which is presumed to rise to 3.5%. However, the European Central Bank will publish its minutes of the last meeting on Thursday, in which an increase of 75 basis points was announced in a context in which inflation in the eurozone climbed to 10% in September.

In addition, manufacturing production and sales data will be published both in Europe and in the United Kingdom and the United States. Clues that can guide central banks to what extent their rate hikes are holding back the economy as it struggles to contain prices. Another data that is expected in the United States will be the unemployment rate for September in the country, while in China they will celebrate throughout the week -the Golden Week- for the anniversary of the formation of the People’s Republic of China.

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