At the ministerial meeting, OPEC+ decided to reduce its production cap by 2mbpd in November versus the August level, which is similar to the one in October. The decision to cut stemmed from “the uncertainty that surrounds the global economic and oil market outlook.” As some members of the alliance such as Russia already produce below the new lower cap level, the effective reduction in real barrels from the oil markets is less but still significant. According to the Saudi energy minister, the actual cut is around 1-1.1mbpd. The new production cap levels are valid until end 2023, and while ministerial meetings are now only planned to take place every six months, the group still has the ability to call an extraordinary meeting if market conditions warrant.
We continue to hold a positive outlook for oil prices. With oil demand benefiting from gas-to-oil switching this winter, the likely end of OECD releases of strategic oil reserves and the European ban on waterborne Russian crude imports coming into force on 5 December amid lower OPEC+ crude production, we expect the oil market to tighten further. As such, we continue to expect Brent to move above the USD /bbl mark over the coming quarters.
