OPEC+ will cut oil production by 2 million barrels per day amid looming demand concerns and the ongoing friction between the West and Russia over the war in Ukraine.
The output cut, the largest since the start of the pandemic, appears to be about the global oil picture as well as politics, says one oil analyst.
“I think with OPEC you’re generally getting both,” Bob Iaccino, chief market strategist at Path Trading Partners, told Yahoo Finance Live.
“This does seem like a crack in the relationship between the U.S. and Saudi Arabia,” he added. “That’s very discouraging in terms of what can happen with the inflation picture in terms of the midterms.”
The OPEC+ meeting was the first in-person encounter since the start of the pandemic, with Russian energy minister Pavel Sorokin present.
The output cuts are expected to keep a floor on the price of oil, and take into account demand concerns over the on-and-off Chinese lockdowns and recession fears.
“When you look at where crude oil is going, I still think it’s going to be weak. When you look at demand, given the potential recessionary picture globally, demand is going to fall off a cliff,” said Iaccino.
“It is OPEC that is going to be controlling the price. But if we get the global recessions that are being predicted, you’re going to get a continued fall in demand because this particular cut is going to last all the way into December 2023,” he predicted.
“I think OPEC wants to see $100 barrel crude oil. I still think we’re going to see $65 before we see $100 in the WTI crude oil market,” he added.
Ines Ferre is a markets reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre