Russia Suggests 1 Million Barrel Per Day Oil Production Cut

Russia will likely propose a 1 million barrel per day oil production cut to OPEC+ at the upcoming October meeting.

The meeting, according to Reuters, will take place on October 5 as oil prices worldwide continue to drop due to market volatility and fears of recession. The U.S. and other consumers have pressured OPEC to raise production to help the global economy but OPEC has refused and prices have fallen sharply anyway.

According to ZeroHedge, “Saudi Arabia and Russia would likely cut output if Brent drops below $90.”

On Tuesday, according to oilprice.com, Brent Crude dropped to $85.53 per barrel signifying the decrease in production is imminent. According to Gary Ross, CEO of PIRA Energy Group, “OPEC would have to make oil cuts between 500,000 and 1 million bpd to keep Brent above $90 per barrel.”

OPEC+ is a group that combines OPEC countries and allies, like Russia, that produce large amounts of oil for the rest of the world.

With both Russia and top OPEC+ oil producer Saudi Arabia, members of the OPEC+ group, calling the group to cut production, it is almost certain that the rest of OPEC+ will agree.

At a previous meeting, OPEC+ cut production targets by 100,000 barrels per day starting in October. This cut came against the wishes of many major oil consumers, including the U.S., and shows a willingness on the part of OPEC+ to lower output so that prices stay high.

The meeting in October will determine production targets for the month of November which is also the month that the current batch of U.S. Strategic Petroleum Reserves (SPR) will cease. U.S. oil reserves have recently reached a 40-year low and will need to be replenished in the short run.

The U.S. SPR has kept oil supply artificially high and prices artificially low, so the combination of taking those off the market while OPEC+ reduces production significantly could lead to a gas price hike reminiscent of the first half of 2022.

It is a win for the democrats that this price hike would, theoretically, happen after the midterm elections.