BAKU, Azerbaijan, Oct.11. OPEC+ announcement to cut oil production will drive prices back to the three-digit level, Gal Luft, co-director of the Institute for the Analysis of Global Security (IAGS) told Trend.
OPEC+ announced a major production cut of 2 million barrels per day (bpd) starting in November to bolster oil prices. The oil alliance decided to cut its overall output by 2 million bpd from its August production targets. The reduction equals around 2 percent of this year's global oil demand, which is estimated by OPEC at around 100 million bpd.
“At the root of the decision is OPEC’s intention to signal to the G-7 and other major buyers that their attempts to create a “buyers club” which can bargain down prices would be self-defeating. The announcement will drive prices back to the three-digit level but what will ultimately affect prices would not be OPEC’s political statements but its actual production. And since some members produce below capacity we can expect upward pressure in prices,” he said.
Noting that G-7 attempts to impose a price cap would only cause prices to come up, Luft said those who wanted Russian oil to sell for $40 will be forced to buy it for $140.
“Also, US withdrawals from its strategic reserves have been reckless, leaving the US with insufficient cushion for the event of a major supply disruption. Altogether I predict oil settling around the $120 level in the first half of 2023,” the expert concluded.