Oil Jumps as OPEC+ Mulls Biggest Production Cut Since Pandemic

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Oil surged near $83 a barrel on indications the OPEC+ alliance is considering slashing production by more than 1 million barrels a day to revive plunging prices when it meets this week.

A reduction of that magnitude would be the biggest since the pandemic, although OPEC+ delegates said a final decision on the size of the cuts won’t be made until ministers gather in Vienna on Wednesday. West Texas Intermediate rose almost 5%, putting prices on track for the first gain in three sessions.

“It is interesting that OPEC+ is considering a production cut already when Brent has hardly touched below $85 a barrel,” said Helge Andre Martinsen, senior oil analyst at DNB Bank ASA. “Most of the OPEC+ players, including Russia, are producing below its production due to capacity constraints. Hence, the majority of the group will feel no pain by supporting a production cut.”

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A large output cut may draw criticism from the US and other major consuming-nations, where energy-driven inflation has forced central banks to aggressively jack up interest rates. There is also the specter of European sanctions on Russian oil that are due to come into effect from December.

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In Asia, China issued new quotas for fuel exports and crude imports last week as it seeks to revive its economy, adding to the bullish outlook for oil. The world’s biggest crude importer has seen energy demand take a tumble due to virus lockdowns and a property slump this year.

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This recession could be different than the last three. 2008, late 2014 to 2015 and 2020 all saw oil prices take a HUGE tumble. Wondering if due to political decisions, Ukraine/Russia, and American energy investors not as much clamoring for growth, growth, growth in the shale game, if maybe oil prices even in the recession hover in the $75-90 range, especially now with China coming out of another round of COVID lockdowns.