<article><p><i>Adds Saudi estimate on production impact in para 5</i></p><p class="lead">Opec+ has agreed to slash its crude production target by 2mn b/d from November, the biggest cut since the group reduced quotas by 9.7mn b/d at the start of the Covid crisis in 2020. The coalition has also agreed to extend its production co-operation agreement until the end of 2023.</p><p>Today's decision — taken at the group's first in-person meeting in Vienna since March 2020 — comes against a backdrop of heightened concerns that an inflation-driven economic slowdown will weigh on global oil demand. It was taken "in light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market," the Opec Secretariat said. </p><p>Oil ministers from the group have had to consider a number of competing challenges that threaten oil market stability. On the one hand, several oil-consuming economies face a potential recession on the back of rising inflation, fuelled by energy price hikes since Russia's invasion of Ukraine. On the other hand, supply constraints loom large, with limited spare crude production capacity within Opec+ and elsewhere exacerbated by uncertainty over the impact of the EU's upcoming embargo on Russian seaborne imports and price caps on Russian oil.</p><p>The decision to cut quotas has disappointed the US administration, which has been trying to persuade Opec+ for months to raise supply to help temper oil prices. Following the meeting in Vienna, the White House <a href="https://direct.argusmedia.com/newsandanalysis/article/2377556">vowed to consult with Congress</a> on a way to bring Opec to heel — a reference to perennial legislative attempts to allow anti-trust action against the producer group.</p><p>To what extent the quota reduction tightens supply remains to be seen. Saudi energy minister Prince Abdulaziz bin Salman estimates that it will amount to a 1mn-1.1mn b/d drop in actual output, as only those countries producing at or close to their targets today will be materially impacted by the lower quotas.</p><p>The 2mn b/d quota cut from November will take the collective output ceiling of the 19 countries participating in the deal to 40.1mn b/d, the lowest since April but still higher than their actual production in August. Quota-bound members fell 3.58mn b/d below target in August, according to an average of secondary source estimates, with several of them hamstrung by dwindling spare capacity, underinvestment, infrastructure issues and, in the case of Russia, sanctions. Fourteen out of the 19 countries undershot their August quotas, according to <i>Argus'</i> survey. Russia, Nigeria and Kazakhstan had the largest shortfalls. </p><p>Besides the 2mn b/d quota cut and the deal extension, the group also agreed today to reduce the frequency of its meetings. After the next ministerial meeting on 4 December, ministers will meet every six months, in line with the normal schedule pre-pandemic. The group's Joint Ministerial Monitoring Committee (JMMC) will meet every two months.</p><p class="bylines">By Nader Itayim, Ruxandra Iordache, Bachar Halabi and James Keates</p><p class="bylines"></p></article>
