Oil Stocks Expected To Rally Amidst The Product Cut Decision Made By The OPEC+
On Wednesday, the members of OPEC+, who are the most powerful oil producers in the entire world, gathered to decide the fate of oil prices.
The members of OPEC+ have decided to impose deep cuts in oil production in the upcoming month. The matter is already agreed upon and more pressure is to be put on the consumers starting November 2022.
OPEC+’s Move to Recover Sliding Oil Prices
The latest reports suggest that OPEC+ is now eager to deal with sliding oil prices. For this purpose, the OPEC+ members have come up with an agreed decision.
Although the United States Government has demanded that the oil outputs must not be cut, OPEC+ has decided to do things in a different manner.
The US Government had made the demand to ensure that the global economies find a cushion and are able to grow during the difficult times.
Another reason why the US Government would be trying to do it is because of the midterm elections that are to take place in November of 2022.
Despite the demand, OPEC+ has decided that it will be proceeding with cutting its output to spur a recovery in the prices of crude oil.
OPEC+ to Cut 2 Million Barrels per Day
OPEC+, which comprises OPEC and non-OPEC allies, have decided that they will be cutting the oil output by 2 million barrels per day. The reduction in oil production would be put in place from the month of November.
Wednesday marked the first time after 2020 that the members of the OPEC and non-OPEC had met face-to-face to decide their next move.
Expectations of Energy Market Participants
The participants of the energy market had expected that Saudi Arabia, Qatar, Nigeria, Russia, and other countries who are members of OPEC+ would cut their oil outputs.
They had expected that the reduction would be somewhere between 500k barrels and 2 million barrels per day. Turns out, the participants were correct as the OPEC+ has gone with the highest expectation.
A Major Reversal is in Order
Back in 2021, a virtual meeting was held between the OPEC+ members where it was decided that the oil outputs would be cut by 10 million barrels per day.
The reduction was made keeping in mind the demand that had crashed completely during the COVID-19 pandemic. As the situation started to recover, OPEC+ wanted to cover the losses faced due to extremely low oil prices during the pandemic.
According to market experts, the decision made by OPEC+ would significantly increase oil prices. At present, the oil prices are sitting around $80 per barrel.
The move would eventually increase the oil prices, taking them up to $100 per barrel. This would eventually help increase the share prices of energy companies, as well as impact the commodity investors.
