OPEC agrees to cut oil production after falling oil prices

On Monday, the Organization of the Petroleum Exporting Countries announced its decision to cut production as early as next month. The current contraction will be the first since the peak of the pandemic, and this is due to the upcoming global economic downturn, which will affect demand in one way or another.

A 100,000 barrel cut in oil production is scheduled for October, which is fixed by an agreement concluded between OPEC and oil-producing partner countries.

With rising energy costs, prices and inflation, and under pressure from major oil consumers, including the United States, the OPEC+ team approved the September increase in their production plans equal to 0.1% of global demand about a month ago.

According to the OPEC+ group, the increase in production related exclusively to September 2022, and now a decision has been made to implement a return to August 2022 levels.

On Monday at 8:45 AM ET, the global benchmark - Brent Crude futures traded at $96.40 a barrel, up 3.6% from the previous level.

However, a fall in global oil prices by more than 20% since the beginning of June has prompted producers to note the risk of a significant slowdown in economic growth in countries such as China and the US, as well as in Europe.

The oil cartel's market report, released in August, adjusted its own forecast for global demand for OPEC crude oil relative to 2022 and 2023 downward by 300,000 barrels per day.

Last month, the Paris-based International Energy Agency reported that the surge in oil demand associated with mitigations of COVID restrictions is starting to fade and will reach 40,000 bpd in the last quarter of the current year.

In addition, if an agreement is reached on a new nuclear deal between Iran, the US and Europe, which allows mitigating the current sanctions on oil exports, an increase in supplies may become quite real.