The panel of OPEC+ ministers on Wednesday recommended trimming the group’s output limits of 2 million barrels a day to support oil prices. The 45th Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 33rd OPEC and the non-OPEC ministerial meeting are scheduled to take place on October 5th in Vienna, Austria.
According to a Bloomberg report, the recommendation from the cartel’s Joint Ministerial Monitoring Committee will be discussed by ministers later on Wednesday before they make a final policy decision, delegates said, asking not to be named because the information is private.
If the panel’s recommendation is considered and approved by the Organization of Petroleum Exporting Countries and its allies during Wednesday’s meeting, then Bloomberg reports that such would have a smaller impact on global supply than the headline number suggests because several countries are already pumping well below their quotas. Simply put, they would already comply with OPEC+ new limits without having to cut production.
However, notably, the 2 million barrel cut will still be the largest cut by OPEC+ since 2020. Such is expected to be another shock to the global economy which is already impacted by multi-year high inflations with central banks firefighting the consumer price by monetary policy tightening. Also, the move is announced amidst high energy costs.
As per Bloomberg’s calculation based on September output numbers, the cut of 2 million barrels a day in the group’s output target, shared pro rata — would require just eight countries to trim their actual output and that will lead to a real reduction of 880,000 barrels a day.
In its September 2022 report, OPEC+ stated that looking forward to the coming year, global economic growth in 2023 is again expected to be strong at 3.1%. This matches the average pre-pandemic growth level of around 3.1% between 2009 and 2019. Despite the obvious downside risks, there is also upside potential to the global economic growth forecast.
In the report, OPEC+ had further said that oil demand is forecast to remain driven by ongoing global economic growth, especially by the recovery in travel and transportation, which is projected to lead to robust overall growth in oil demand of 3.1 mb/d in 2022 and 2.7 mb/d in 2023, surpassing the pre-COVID-19 levels, to stand at 102.7 mb/d.
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