During the most recent OPEC+ meeting in August, the organization announced a plan to cut production by 100,000 barrels per day. At the time, Brent crude oil prices were around $95 per barrel and steadily declining. In the days following the announcement, prices went back up to around $100 per barrel. Since then, prices have been declining steadily again and as of the time of writing this blog post, Brent crude is roughly at $90 per barrel.
According to an unnamed source within OPEC+, Saudi Arabia and Russia have targeted a price floor of $100 per barrel. The source cites this number being chosen by the marquee OPEC+ members as a good, fair price for all. The elevated price floor is essentially in response to higher production costs driven by inflation and supply chain issues. Russia also seeks to make up for lost ground, as they have been selling oil at a discounted rate following sanctions imposed by the United Nations.
The source goes on to say the countries acknowledge the dangers of per barrel prices reaching $120 plus which is near the highs we saw immediately following Russia’s invasion of Ukraine. A $100 per barrel floor presents minimal impact to the global economy. With these two members of OPEC+ backing such a floor, it opens the door for other member countries to align with this thinking and defend the number by cutting production yet again.