OPEC+ countries (Organization of the Petroleum Exporting Countries) have announced that they will cut oil production by more than 1 million barrels per day. And this is quite surprising, says TNO researcher René Peters, because at the November meeting it was already agreed to produce 2 million fewer barrels of oil under Saudi Arabian leadership.
The announced reduction in oil production almost seems to be a reaction to the banking crisis and the risk of an imminent recession, which oil-producing countries are looking at with some fear, says Peters. The price of oil has dropped nearly 10% in the past week, to just above $70 a barrel. This is a price that OPEC countries actually consider too low.
That is why they come up with a proposal for reducing production capacity in order to drive up prices. OPEC wants oil prices to stabilize, but at a price level they are comfortable with. They must be able to make a sufficient income out of it.’ They are aiming for prices of $80 or $90 a barrel. Also, oil exporters do not like a very high price, because it accelerates the transition to alternatives to oil.
OPEC wants oil prices to stabilize, but at a price level they are comfortable with.
Russia, which belongs to the OPEC+ countries, had already announced that it would produce 500,000 fewer barrels of oil. “It’s very important for that country that prices go up a bit, because Russia is currently selling oil at a discount to India and China,” Peters says.
Oil price
According to him, we must not forget that the demand for oil around the world is still growing, even if the demand is increasing less and less than before. “But we’re still using about 100 million barrels of oil a day, and that’s rising slightly.” With reduced oil production, as well as a higher oil price, we may also have to count on slightly higher prices at the pump, says Peters.
Source: BNR
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