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December 4, 2023

Chart of the Week: OPEC+ cuts oil production

by Fathom Consulting.

At Thursday’s 30 November OPEC+ meeting (i.e., OPEC plus ten other countries[1]), member countries announced they will cut oil production by 2.2 million barrels per day. This includes, among others, Saudi Arabia extending its production cuts of 1 million barrels per day, a move that was previously slated to end December 2023, and Russia’s previously announced cut in exports by 500,000 barrels per day at the start of 2024, from January to March. However, as a whole, OPEC+ has not formally agreed to any production cuts following Thursday’s meeting. Reflecting on May 2023, OPEC+ oil production stood at 57.2% of global production, compared with OPEC’s 37.4%, and 15.7% for the US. The group therefore holds great power, and production cuts can have a significant impact on the price of oil. Both an expected production cut and an actual production cut should lead to an increase in the price of oil. However, the announcements have yet to be reflected in an increase, with the price of WTI crude oil down slightly on the day, to 76 dollars per barrel, decreasing further to 74 dollars per barrel on Friday. The muted market reaction could perhaps be explained by OPEC+ not formally agreeing on production cuts as a whole, or because the production cuts out of Saudi Arabia and Russia were already expected.

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[1] OPEC+ was created in 2016, and includes OPEC countries as well as Russia, Mexico, Kazakhstan, Oman, Azerbaijan, Malaysia, Bahrain, South Sudan, Brunei and Sudan

The views expressed in this article are the views of the author, not necessarily those of LSEG.

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