OPEC+ discusses cutting oil output at next week’s meeting

OPEC+ has begun discussions about cutting oil output when it meets next week, as a fragile global economy continues to pressure crude prices.

The size of the potential supply reduction is still under consideration, said a delegate, asking not to be identified as the talks are private. The Organization of Petroleum Exporting Countries and its allies will meet to decide November output levels on October 5.

Oil prices have slumped by a fifth since early August on fears over the global economy, trading near $88 a barrel in London on Thursday. The losses threaten the spectacular revenue windfall being enjoyed this year by Saudi Arabia and its partners.

The OPEC+ alliance showed its readiness to stabilise markets with a symbolic cut at its last meeting. Saudi Energy Minister Prince Abdulaziz bin Salman has vowed to remain “preemptive and pro-active,” while Nigerian Oil Minister Timipre Sylva said last week the group may be “forced” to make additional cuts if crude prices keep falling.

Market observers such as UBS Group and JPMorgan Chase & Co. have said OPEC+ may need to cut at least 500,000 barrels a day to staunch the oil price slide. All but one of 16 traders and analysts in a Bloomberg survey predicted the alliance will agree a cutback.

“We certainly see a significant chance that the producer group will opt for a substantial cut to try to signal that there is indeed an effective circuit breaker in the market,” said Helima Croft, chief commodities strategist at RBC Capital Markets. The cutback could be as much a 1 million barrels a day, she said.

At its last meeting on September 5, the group agreed a token reduction of 100,000 barrels a day for October, despite calls from consuming nations to help tame rampant inflation by keeping the taps open. With gasoline prices retreating in the US, some of that external pressure may now be easing.