5 October 2022
If you are covering OPEC+’s decision to cut oil production by 2 million barrels per day, please find below a comment from Jamie Maddock, equity research analyst at Quilter Cheviot:
“OPEC’s decision to cut production by 2 million barrels per day is likely to have consequences, even as some members of the cartel struggle to hit their current targets. We are currently witnessing a globally coordinated strategic oil reserve release, predominantly from the US, that aims to push the price of oil down and help consumers at a time when inflation has surged and the cost of living has intensified. This is ongoing, but this new cut in supply could mean that the benefits of this programme are negated if this move is fully implemented.
“Furthermore, at the end of the year and into next we have the EU implementing its embargo on Russian oil and oil product shipping insurance. Despite its noble ambitions, this will likely have an impact on output and thus also hit supply at a time when OPEC is cutting and thus pushing prices higher.
“One solution could be that the EU agrees to a cap for the price they pay for Russian oil but finding this level and implementing it will be difficult and face headwinds. In short, the oil price is likely to remain elevated and volatile for some time to come given the geopolitical issues show no sign of resolving themselves and governments do all they can to lower prices for the end consumer.”
