OPEC+ to discuss output reduction at its meeting on 5th September

2 Sep 2022 , 08:44 AM

OPEC+ is expected to discuss output reductions at their meeting on September 5; however, despite Friday’s increase in oil prices, the benchmarks were still on pace to post their worst weekly loss in four weeks due to concerns that COVID-19 restrictions in China and slow global growth will hurt demand.

While U.S. West Texas Intermediate (WTI) oil futures increased by $1.16, or 1.3%, to $87.77 a barrel at 01:17 GMT, Brent crude futures increased by $1.20, or 1.3%, to $93.56 a barrel. In the previous session, both benchmark contracts fell 3% to two-week lows. Both Brent and WTI were expected to decline by around 8% and 6%, respectively, for the week.

On September 5, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, is scheduled to meet amid dropping demand and plummeting oil prices, even though top producer Saudi Arabia asserts that supply is still tight.

This week, OPEC+ downgraded its projection for demand, now predicting that it will behind supply by 400,000 barrels per day (bpd) in 2022, although it still anticipates a market shortfall of 300,000 bpd in its base scenario for 2023.

The likelihood that OPEC+ would respond with increased production at their meeting on Monday or in October rises, according to commodities expert Baden Moore of National Australia Bank.

“Given the very low inventory levels globally, the constrained capacity of supply alternatives, and the continued energy constraint in Europe, we anticipate any cut in supply from OPEC+ to have a major impact on oil prices,” Moore said.

Investors are concerned about the immediate effects of the most recent COVID-19 limits in China, where the city of Chengdu was the most recent to impose a lockdown on Thursday, which has affected companies like Volvo.

That information was released on the same day statistics revealed that, as a result of weaker demand and production disruptions from power shortages and COVID-19 outbreaks, manufacturing activity in China shrank in August for the first time in three months.

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