OPEC+ is set to make a production cut decision this week, with reports suggesting it could be a one million barrel per day reduction.
Some have dismissed the talk about a deep OPEC+ production cut. After all, OPEC alone has beenof its own production targets by more than 1 million barrels daily for months already. Russia’s oil production is already down by more than 1 million bpd, too, according to production data.
Inflation is one reason. It has become ubiquitous, so the sweet spot of the past is not necessarily the sweet spot of the future. But there is a bigger reason: spare capacity. In September, output rose to the highest level since 2020, according to a Reuters poll, although it still missed its targets. Interestingly, one of the leaders in production gains last month was one of the chronic underperformers: Nigeria. Another leader was Libya, which is not bound by the OPEC+ production quotas because of its difficult political situation, which makes the security of oil supply virtually non-existent.
OPEC+, meanwhile, has been tightening its grip on oil markets, despite its underperformance and despite its limited spare capacity. Or maybe because of those two factors.
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