OPEC Announces To Reduce Its Oil Production In October By 100k bpd

On September 5, the 32nd OPEC and non-OPEC ministerial meeting discussed the adverse impact of the volatility and decline in liquidity in the oil markets. To bring stability and efficient functioning in the market, it decided that the group will revert to August 2022 production levels in October, 2022. The group is going to reduce its oil production by 0.1mmbpd. At the meeting, it has been noted that the revision was only intended for September 2022.

Commenting on the matter, Megh Mody, Commodities and Currencies Research Analyst, Prabhudas Lilladher Pvt Ltd, told the media, "OPEC and its allies led by Russia on Monday agreed a small oil production cut to bolster prices that have slid on fears of an economic slowdown. The oil producers will reduce output by 100,000 barrels per day (bpd), amounting to only 0.1% of global demand, for October and also agreed they could meet any time to adjust production before the next scheduled meeting on October 5. Prices will not be impacted as there will be minor up-move. This production cut can be a breather for process due to weak macro sentiment, renewed china lockdown, uncertainty over potential US- Iran deal."

This decision by OPEC can further initiate a price rise in oil. In FY22 India imported 212.2 million tonnes of crude oil, an increase from 196.5 mt in FY21. The increasing oil demand has triggered to increase in imports. However, a price rise in oil globally will also impact Indian oil prices similarly. The current account deficit in India will also be affected largely by this price rise. At the time of writing, Brent Crude Oil price stood at US$ 95.02 per barrel.

Yesterday, the group also mentioned its commitment, flexibility, and the means to deal with the current challenges and provide guidance to the market. The next OPEC+ meeting is scheduled to be organized on 5th October, 2022.