Oil Output Cut Will Underwhelm Without a Big Change
An OPEC+ output cut will be diluted by its members’ chronic underperformance — unless baselines are changed or Saudi Arabia acts alone.
An output cut is expected when OPEC and its allies meet on Wednesday.
Photographer: Akos Stiller/BloombergThe oil producers of the OPEC+ convene on Wednesday to set output targets for November. With Brent crude trading at $85 a barrel, the group is expected to agree to a second straight production cut. But even a big reduction to targets may have little impact on actual supplies, unless they can agree to redistribute production targets, or the Saudis step in to act alone.
Meeting virtually in early September, members agreed to a token cut of 100,000 barrels a day to output targets for October. This time around the curtailment is likely to be much larger, with some analysts estimating that it could be as much as 1 million barrels a day, although a figure of half that size is the most widely forecast number. The group has also taken a last-minute decision to meet face to face for the first time since March 2020. That may indicate that it will try to do something more significant than apply a pro-rata cut to existing targets. It certainly needs to.