OPEC’s Shock Cut Is a Capitulation to Oil’s Decline
Producers want more cash from the market. Choosing not to expand output is good for prices, but signals little confidence in demand.
Weakening demand.
Photographer: Maya Sidiqqui/BloombergWhat does it look like when the world’s biggest oil producers capitulate to the decline of their key product? We’re seeing it today.
The surprise weekend announcement by the OPEC+ grouping of more than 1.1 million barrels of production cuts, on top of the 500,000 daily barrels already declared by Russia last month, knocks bullish forecasts for oil consumption on their head. Most had been expecting the current sluggish conditions, which drove Brent crude to a 15-month low March 19, would be replaced by voracious appetites from consumers in the second half of the year as air and road traffic finally recovered to pre-pandemic levels.