OPEC+ agrees to small oil production cuts

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is pictured at its headquarters in Vienna, Austria on August 21, 2015. REUTERS/Heinz-Peter Bader/File Photo

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  • Supply will be cut by 0.1 million bpd from October
  • Iran nuclear deal will boost oil supply
  • Russia’s gas supplies to Europe were further cut
  • Brent crude fell from $120 to $96 in June

LONDON, Sept 5 (Reuters) – OPEC and its allies, led by Russia, agreed on Monday to cut oil output by a small amount in a bid to boost prices, which have fallen on fears of an economic slowdown.

Oil producers will cut production by 100,000 barrels per day (bpd), just 0.1% of global demand for October. They also agreed that OPEC chief Saudi Arabia could call an extraordinary meeting at any time if volatility persists. read more

The decision maintains the status quo as OPEC observes fluctuations in oil prices.

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“OPEC+ is wary of prolonged price volatility created by weak macro sentiment, thin liquidity and renewed China lockdowns, as well as uncertainty surrounding a potential US-Iran deal and efforts to create a Russian oil price ceiling,” said Matthew Holland.

OPEC producer Saudi Arabia last month flagged the possibility of production cuts to address what it sees as exaggerated oil price movements. read more

Benchmark Brent crude fell to around $95 a barrel from $120 in June due to economic slowdown and recession in the West.

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Russian Deputy Prime Minister Alexander Novak said on Monday that the OPEC+ oil production cut was a reflection of expectations of weaker global economic growth.

Oil prices have been dragged down by a potential supply boost for Iranian crude to return to the market if Tehran is able to renew a 2015 nuclear deal with world powers.

“The political angle seems to be that Saudi Arabia’s message to the US about the revival of the Iran nuclear deal … is difficult to interpret as anything other than a decision to support prices,” said Thomas Varga of oil broker PVM.

While the prospect of a nuclear deal on Friday looks slim, if sanctions are eased, Iran is expected to add 1 million bpd to supply, or 1% of global demand. read more

US President Joe Biden is committed to taking whatever steps are necessary to reduce energy supplies and prices, the White House said Monday.

“The cut suggests there is a willingness to protect oil prices above $90 a barrel,” said Giovanni Stanovo at UBS.

Rod Alghatiri at Eurasia Group said: “It’s a signal of intent … the decision to cut reinforces the message of ‘don’t take us for granted’ without doing anything drastic.”

However, signals from the physical market suggest that supply is tight, with several OPEC countries producing below targets, while new Western sanctions threaten Russian exports.

Russia has said it will cut off oil supplies to countries that support the idea of ​​capping the price of Russian energy supplies because of the military conflict in Ukraine.

Meanwhile, Russia’s gas supply to Europe has been further cut, which will further drive up prices. read more

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“Cutting an output at a time when the world is facing a cost-of-living crisis doesn’t make them friends,” said Onda analyst Craig Erlam.

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Additional reporting by Rowena Edwards and Olesya Astakova Writing by Dmitry Zhdanikov Editing by David Goodman and David Evans

Our Standards: Thomson Reuters Trust Principles.

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