Following yesterday's meeting in Vienna, delegations from OPEC countries decided to cut production, the largest since the pandemic broke out. The production cut was estimated at 1-2 million, with the cartel opting for the higher end of the range and deciding to cut oil production at 2 million barrels per day (b/d).
WTI crude oil
WTI crude oil futures rose toward $88 per barrel on Thursday. So, in one week, the price of oil has jumped 10 percent, turning around from levels seen before the outbreak of war in Europe. OPEC+ agreed to cut production by 2 million barrels a day, or about 2 percent of global supply, the largest production cut since the start of the pandemic. Earlier, oil prices fell below $80, which could hit Arab countries' production profitability thresholds, as that's where levels are estimated to balance the budget from oil export revenues.
Source: Conotoxia MT5, XTIUSD, D1
Oil production cut in response to rate hikes and slowdown
According to comments on the OPEC decision, Saudi Arabia noted that the decision was made in response to rising interest rates in the West and a weakening global economy. In addition, Saudi Arabia added that the decision to cut production was due to the U.S. plan to curb oil prices. Goldman Sachs, in turn, sharply raised its oil price forecast for the fourth quarter to $110 following the OPEC+ decision, Bloomberg reported. Adding to the upward pressure on oil prices, Russian Deputy Prime Minister Alexander Novak said Russia may in turn temporarily reduce output in response to the US-led plan to impose a price cap on Russian oil.
White House reacts to rising oil prices
U.S. President Joe Biden on Wednesday directed the Department of Energy to deliver another 10 million barrels from the Strategic Petroleum Reserve (SPR) to the market next month due to the "continuing negative impact of Putin's invasion of Ukraine" BBN reported. "The President will continue to direct SPR releases as appropriate to protect U.S. consumers and promote energy security" - stated the White House in a press release. According to EIA data, there are still 416 million barrels of oil in the SPR, where two years ago it was more than 650 million and at its peak more than 700 million. The current level is the lowest since 1984. The oil in the SPR is held in underground tanks, which are located in Louisiana and Texas.
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Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.