'Historic' OPEC+ Cut Could Push Oil Back to $100

The OPEC+ group of oil producers is discussing output cuts of more than 1 million barrels per day (bpd), OPEC sources said, and voluntary cuts by individual members could come on top of that, making it the largest cut since 2020.

The meeting will take place on Oct. 5 against a backdrop of falling oil prices and months of severe market volatility which prompted top OPEC+ producer, Saudi Arabia, to say the group could cut production.

"The OPEC ministeres are not going to come for Austria for the first time in two years to do nothing," said Dan Pickering, CIO of Pickering Energy Partners, "So there's going to be a cut of some historic kind."

However, Pickering added, it is more likely that the actual number of barrels coming off of the market will be 500,000, which will "be enough to support the market in the near term."

Stephen Brennock, a senior analyst at PVM Oil Associates in London, said Monday in a research note, "A further uptick in trading activity coupled with tightening near-term oil fundamentals could well push oil back to $100/bbl."

Goldman Sachs analysts also foresee brent reaching triple digits by year-end, and $105 by early spring.

OPEC+, which combines OPEC countries and allies such as Russia, has refused to raise output to lower oil prices despite pressure from major consumers, including the United States, to help the global economy.

Prices have nevertheless fallen to below $90 per barrel from as high as $120 in recent months due to fears about the global economy and a rally in the U.S. dollar after the Federal Reserves raised rates.

"It may be as significant as the April 2020 meeting," the source said, referring to when OPEC+ agreed record supply cuts of around 10 million bpd, or 10% of global supply, as the COVID-19 pandemic hit demand.

A significant production cut is poised to anger the United States, which has been putting pressure on Saudi Arabia to continue pumping more to help oil prices soften further and reduce revenues for Russia as the West seeks to punish Moscow for sending troops to Ukraine.

The West accuses Russia of invading Ukraine, but the Kremlin calls it a special military operation.

Saudi Arabia has not condemned Moscow's actions amid difficult relations with the administration of U.S. President Joe Biden.