- OPEC set to meet later today
- Production cut of one million barrels widely expected
- Brent trading above $90
The price of Brent crude oil is at its highest level in two weeks, above $90 per barrel, as traders await news from Vienna where producers’ cartel OPEC is set to meet later today.
Now often operating as OPEC+ (reflecting affiliate nations like Russia and Mexico), the recent spike in oil prices during a period of market turmoil shows the cartel still has some influence on the direction of markets.
The high-water mark for OPEC arguably came in the 1970s when it introduced an oil embargo on Western countries which had supported Israel in the Yom Kippur war leading oil prices to quadruple.
Since then OPEC has carried less weight as alternative sources of supply have been discovered, not least in the US which is now the world’s top global producer of crude oil.
HOW FAR WILL OPEC GO?
The question is just how far OPEC will go this time round. A cut of one million barrels of oil per day (bopd) has been widely trailed, up from 100,000 barrels in September, and this may well have been priced in. However, if as speculation suggests a two million barrel cut was introduced that might well move the dial.
In the background there is also the inherent unpredictability of Russia’s response as the European Union looks to cap the price of the country’s oil in response to its invasion of Ukraine.
Consultancy firm Capital Economics commented ahead of the summit: ‘Presumably, the group is concerned about prices taking another leg down since their last meeting, and demand weakening as the global economy looks set to tip into recession.
‘However, many OPEC+ members are producing far less oil than their quotas. As a result, the actual hit to supply will be markedly lower than the headline cut to the group’s quota.’
