Oil prices fell to their lowest level since early July on Thursday, putting pressure on the OPEC+ group. Major producers will consider production cuts.
Brent crude, the international crude oil benchmark, fell 5.2 percent on Thursday to just below $77 a barrel, below the $80 level at which the government budgets of Saudi Arabia and Russia are starting to become strained. It’s one of the biggest daily declines this year. U.S. benchmark West Texas Intermediate fell 5.5 percent to $72.48 a barrel.
OPEC+ under pressure
The drop in prices is putting pressure on Saudi Arabia, Russia and other OPEC+ members ahead of a Nov. 26 meeting at which they will consider how to respond to weakening oil prices and concerns that a potential collapse in global growth could dampen demand.
“There may be some tests before the OPEC+ meeting. In the past, they regularly announced cuts or extensions of cuts, keeping prices in the range of $82-85,” said Daan Struyven, head of oil research at Goldman Sachs, quoted by the Financial Times. “Our current expectation is that Saudi cuts will be fully extended into the first half of next year, with no expected group cuts.”
Cuts in oil production
Oil remains under pressure for much of 2023, but prices began to rise in the summer as Saudi Arabia and Russia led the OPEC+ group in making additional production and export cuts. Saudi Arabia made the first of several additional voluntary production cuts in July and said they would continue at least through the end of the year.
On Tuesday, the International Energy Agency said the oil market should return to surplus by early 2024 even if Saudi Arabia extends production cuts this year.
Supply continues to grow outside OPEC+ countries, with the United States, Guyana and Brazil increasing oil production. The Brazilian government has set itself the goal of becoming the world’s fourth largest oil producer by 2029.