[Asia Economy Reporter Park Byung-hee] The Organization of the Petroleum Exporting Countries Plus (OPEC+) may decide to cut production by up to 2 million barrels per day at its regular meeting on the 5th (local time), Bloomberg News reported on the 4th, citing sources.
Sources said OPEC+ is considering production cuts ranging from 1 million to 2 million barrels per day. If the cut is decided as expected, it will be the largest reduction since March 2020.
OPEC+ drastically cut oil production by 5.8 million barrels per day in March 2020, right after the COVID-19 pandemic began, in response to the decline in oil demand. Since then, production has been gradually increased, but at last month's meeting, a cut of 100,000 barrels was decided. The expectation that the scale of the cut will be significantly expanded this time can be interpreted as growing concerns over falling oil prices.
Bloomberg predicted that Saudi Arabia, the leader of OPEC, may push for a large-scale cut to support Russia. Russia currently wants production cuts to prepare for war expenses due to the prolonged conflict in Ukraine.
On the other hand, Bloomberg analyzed that if OPEC+ decides on a large-scale cut, tensions with the United States could rise. From U.S. President Joe Biden's perspective, if OPEC+'s large-scale cut decision causes inflation to fluctuate, it could be a negative factor for the midterm elections on the 8th of next month. Therefore, there is a forecast that the U.S. will respond if a large-scale cut occurs. The White House recently reportedly instructed the Department of Energy to investigate whether restrictions on petroleum product exports help lower energy prices.
Within OPEC+, there are also concerns that the Russian oil price cap, which the Group of Seven (G7) major countries aim to implement by the end of this year, could be expanded to other countries.
It is also a matter of interest whether opinion coordination within OPEC will proceed smoothly. Recently, the United Arab Emirates (UAE) reportedly decided to accelerate its production increase, which could reignite conflicts with Saudi Arabia, which wants production cuts.
According to sources, the UAE recently advanced its target date for achieving a daily production of 5 million barrels from 2030 to 2025. The purpose is to maximize profits by selling fossil fuels before the transition to eco-friendly energy takes place. The UAE clashed with Saudi Arabia over the scale of production increases in 2021.
Suhail Al Mazrouei, UAE Minister of Energy, arrived in Vienna, Austria, where the OPEC+ meeting will be held on the 4th, and stated a general position that a decision will be made after reviewing materials provided by the technical committee. Abdulaziz bin Salman, Saudi Energy Minister, did not express any particular position.
This meeting will be the first face-to-face meeting since the COVID-19 pandemic in 2020.
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