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OPEC Secretary General Haitham al-Ghais said on Wednesday that the organization is ready to “intervene for the benefit of oil markets”, Saudi-owned Al-Arabiya TV reports, citing Ghais as saying that OPEC is aware, cautious and monitoring economic developments worldwide.
In early October, OPEC+ announced plans to reduce oil production by 2 mb/d in November 2022 from the August 2022 required production level, a move that angered President Joe Biden who lambasted the organization for colluding with Russia to keep oil prices high.
If the plan is implemented, Saudi Arabia and Russia should produce 10.5 mb/d in November 2022; the production of the OPEC 10 group members should reach 25.4 mb/d while that of non-OPEC producers should be 16.4 mb/d. This in effect would lead to the production of OPEC+ coming to an average of 41.9 mb/d. Further, OPEC and its non-OPEC allies including Russia agreed to extend their cooperation, which was set to end on 31 December 2022, by another year.
After an initial bump, oil prices have cooled since the announcement partly because the impact of the production cut is likely to be limited with many members already struggling to meet quotas and also due to economic uncertainty and China doubling down on its zero-Covid policy both of which are likely to hit demand.
OPEC has predicted that China’s oil demand will decline by 60,000 barrels per day this year, after forecasting an increase of 120,000 b/d only a month ago thanks to new lockdowns.OPEC has cut its demand growth view for 2022 by 460,000 bpd to 2.64 million bpd and for 2023 by 360,000 bpd to 2.34 million bpd, citing “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies.”
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.