In anticipation of a meeting of OPEC+ producers to negotiate a significant output cut in what energy executives and experts view as a tight supply market, oil prices increased little on Wednesday, adding to gains of 3% in the previous session. After rising $2.94 the day before, Brent crude increased by 11 cents to $91.91 a barrel. Following a session-high gain of $2.89, U.S. West Texas Intermediate (WTI) crude futures increased 5 cents to $86.57 per barrel.
An OPEC source told Reuters that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, are meeting in Vienna later on Wednesday and are contemplating output cuts of as much as 2 million barrels per day (bpd). The market would be severely tightened by such a large decrease in output, according to analysts at ANZ Research.
In an effort to stop a spike in gas prices in the United States, President Joe Biden is pressuring OPEC+ producers not to go with severe cutbacks, a source familiar with the situation told Reuters. Since several OPEC+ nations currently pump substantially below their current limits, the actual impact of a lower output target on supplies would be minimal. OPEC+ fell 3.58 million bpd short of its output goal in August. A deal on significant cuts, though, “would send a strong statement that the group is determined to support the market,” according to ANZ analysts.
The market is expected to tighten even further as European Union sanctions on Russian oil approach in December, but demand is still expected to be subdued due to worries about a worldwide recession. The U.S. currency, worries about global economic growth, and the impending EU penalties on December 5 all continue to be significant short-term drivers of oil prices, according to Commonwealth Bank commodities expert Vivek Dhar.