OPEC+ Expected to Discuss Additional 1 Million Barrel Oil Production Cut

Concerns over an oversupply of crude oil have raised the possibility that OPEC+ may discuss production cuts.

[Image source=AP Yonhap News]

On the 2nd (local time), major foreign media reported that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC oil-producing countries, collectively known as OPEC+, are discussing a plan to cut crude oil production by up to 1 million barrels per day. OPEC+ accounts for about 40% of global crude oil production.

The discussions appear to have emerged amid concerns over oversupply as international oil prices fell to the low $70 per barrel range. According to multiple sources within OPEC+, the additional production cut plan may be discussed at the ministerial regular meeting scheduled for 2 p.m. on the 4th in Vienna, Austria.

Before the meeting, on the morning of the 3rd, OPEC ministers excluding Russia and Russia’s allies will hold a separate meeting.

The additional production cut under discussion is reported to be up to 1 million barrels per day. OPEC+ member countries previously agreed to cut production by 2 million barrels per day in October last year, and some members voluntarily implemented additional cuts in April.

If an additional cut of 1 million barrels per day is agreed upon at this meeting, the total cut is expected to reach 4.66 million barrels per day, which is about 4.5% of global consumption.

The financial sector does not see a high likelihood that oil-producing countries will decide on additional cuts at this meeting but does not rule out the possibility.

HSBC stated in a report on the 31st of last month, "OPEC+ is not expected to change its policy. However, if supply shortages relative to demand do not materialize in the second half of the year and prices fall below $80 per barrel, production cuts may be implemented."

Ahead of the OPEC+ meeting, on the 2nd, the July delivery West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange closed at $71.74 per barrel, up $1.64 (2.34%) from the previous session. Despite the rise on the day, oil prices fell 1.28% over the week, marking a decline for the first time in three weeks.