Oil Prices Rally As OPEC Plus Members Mull Over Reducing Production

YEREVAN (CoinChapter.com) — Oil prices jumped by nearly $4 on Monday upon reports that the Organization of the Petroleum Exporting Countries (OPEC), and other oil exporters, plan to reduce global oil output. The OPEC+, as the format is called, will meet on Wednesday to discuss plans aimed at increasing oil prices through supply shortages. 

The organization was founded on September 14, 196 by the Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. It currently comprises 13 member countries. However, other Non-OPEC countries, including Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, and South Sudan, collaborate with the organization in the format of OPEC+. 

The primary goal of the format is to reach a consensus on the global demand and supply of oil prices. 

The oil cartel, as the group is also called, considers reducing output by more than 1 million barrels per day. If it materializes, this will be its biggest cut since the start of the COVID-19 pandemic.

Last month, the group reduced the output by 100,000 barrels per day. 

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Brent crude futures crossed the $88.60 mark per barrel upon the news at the time of writing. Meanwhile, the U.S. West Texas Intermediate crude also spiked by over 4% to reach 83.32. 

The price of Brent crude, considered the global benchmark, went as high as $120 per barrel in March following the Russian invasion of Ukraine. The western powers had moved to issue sanctions on Kremlin, raising fears about the future of the oil supply. 

Meanwhile, the policy of central banks and federal organizations, including cutting down on interest rates, also impacted global crude oil prices. 

US President Joe Biden, during his visit to Saudi Arabia in June, urged the country to boost oil production to reduce its dependence on the Kremlin. Russia contributed as much as .74 million barrels a day. 

According to a July report of the International Energy Agency, the United Arab Emirates and Saudi Arabia can increase supply by 2.6 million barrels a day. 

Experts perceive this as a sign of Saudi Arabia’s support for Russia. However, the reasons are first and foremost economic. The country wants to push up the oil prices to at least $90 a barrel. 

If OPEC+ goes ahead with plans to reduce oil production by 1 million barrels, global inflation can get much worse. 

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