Crude futures slip in lead-up to OPEC+ meeting

Front-month ICE Brent has declined by $0.71/bbl on the day from Friday, to $88.90/bbl at 09.00 GMT.

PHOTO: Reports suggest that OPEC+ is planning a substantial output cut at its meeting this week. Group members prepare to meet in person for the first time since the Covid-19 pandemic started in March 2020. Getty Images

Upward pressure:

OPEC+ will be considering an oil output cut of more than 1 million b/d at its meeting on 5 October, according to multiple reports citing OPEC+ sources. This will be the biggest cut the group has made since April 2020, when it reduced cut production by a massive 9.7 million b/d, which was equivalent to 10% of global production.

Analysts from the investment banks UBS and JP Morgan think an output cut of this magnitude can help stem the recent oil price decline.

Downward pressure:

A Reuters survey has found that OPEC’s combined production reached 29.81 million b/d in September - a 210,000 b/d increase over August.

“Worst is yet to come” for the global economy, Credit Suisse has warned in a recent report. The UK and Eurozone are in a recession, China is experiencing slowing growth and the US is on the verge of a recession, says the Swiss investment bank. It predicts more US Federal Reserve's interest rate hikes to continue to strengthen the US dollar and force other central banks to follow with monetary tightening measures, too.

Eurozone inflation hit a new record high of 10% in September, up from 9.1% in August, according to Eurostat data. Almost all economic sectors in Eurozone countries are now experiencing inflationary pressures, not just food and energy.

Soaring inflation in Europe has prompted policymakers at the European Central Bank (ECB) to call for another major interest rate hike. Finland, Lithuania, Latvia and Estonia have shown interest in a 50-75 basis point hike.

By Konica Bhatt

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