The OPEC+ group of oil producers will consider cutting output by more than 1 million barrels a day, according to delegates, when it meets in person on Wednesday for the first time in more than two years.
A larger-than-expected reduction would reflect the scale of concern that the global economy is slowing fast in the face of rapidly tightening monetary policy. A final decision on the size of the cuts won’t be made until ministers meet in Vienna, the delegates said. A cut of 1 million would be the biggest since the pandemic.
Brent crude soared above $125 a barrel following Russia’s invasion of Ukraine in February. It’s since dropped to $85, tempering the spectacular windfall enjoyed by Saudi Arabia, Russia, the United Arab Emirates and other members of the coalition.
A massive cut risks adding another shock to the global economy, which is already battling energy-driven inflation as well as the slowdown. Consumers including the US have been calling for more production, with US President Joe visiting Saudi Arabia earlier this year in search Biden of a new oil deal — and lower prices for Americans at the pump.
Biden is also trying to cut the revenues that Moscow receives for oil as part of efforts to weaken Vladimir Putin’s war effort. An OPEC+ cut would have the opposite effect.
Banks including JPMorgan Chase & Co. said OPEC+ may need to lower output by at least 500,000 barrels a day to stabilize prices. Helima Croft, chief commodities strategist at RBC Capital Markets LLC, has said the group may opt for a cut twice that large.
“I suspect that they might not want to go in person for a minor move,” Croft said.
Read more: Oil Output Cut Will Underwhelm Without a Big Change
The relationship between Riyadh and Moscow that underpins the OPEC+ alliance has survived Russia’s invasion of Ukraine, with no signs of weakening. It’s not yet confirmed if Russian oil chief Alexander Novak will attend in person but if he does it will send a powerful message — as well as proving awkward for Ukraine’s allies in the European Union.
Novak was sanctioned by the US on Friday, following Russia’s annexation of four regions of Ukraine, though the EU has not followed suit. Asked about his potential appearance in Vienna, the Austrian government noted he has not been sanctioned, and had no further comment.
The 23-nation alliance will meet on Wednesday at its headquarters in Vienna, OPEC’s secretariat confirmed on Saturday. The producers have been meeting on-line on a monthly basis and weren’t expected to arrange an in-person gathering until at least the end of this year.
The slump in prices may have changed their minds.
“Only OPEC+ can wake up oil prices from their current slumber,” said Viktor Katona, an analyst at energy analytics firm Kpler in Vienna.