OPEC+, the influential alliance of oil producers, is expected to issue its most significant oil output cut for almost two years. Energy analysts say that the move will push fuel prices to triple digits.
The group comprising OPEC and non-OPEC oil producers will converge this week in Vienna, Austria, to discuss the next step of the oil production policy. This will be the first meeting for the cartel since the start of the COVID-19 pandemic.
OPEC to cut output up to one million barrels
CNBC’s Brian Sullivan told “Squawk Box” that OPEC has been holding meetings virtually since the start of the COVID-19 pandemic and the scheduled physical meeting in Vienna was unexpected. He said that significant cuts are expected, which could be 500,000 barrels per day or even 1.5 million barrels daily.
According to an OPEC+ insider, the group plans to cut oil output by over 1 million barrels/day. Pickering Energy Partners CIO Dan Pickering said that the meeting in Austria would bring together OPEC ministers for the first time in two years and historic output cuts are a possibility.
PVM Oil Associates’ senior analyst in London, Stephen Brennock, said there was upside potential on Monday for oil prices following heavy losses last month.
Oil prices to climb to $100 per barrel
Brennock said in a research note:
“A further uptick in trading activity coupled with tightening near-term oil fundamentals could well push oil prices back to $100/bbl. Those of a bullish disposition have endured a summer of pain, but a winter of hope and expectation is on the horizon.”
Goldman Sachs analysts echoed a return to $100 per barrel, with Brent expected to hit triple digits in the next three months before rising to $105 in six months. On the other hand, the US investment bank calls for WTI to rise to $95 by the end of the year before climbing to $100 in the next six months.
Pickering indicated that OPEC+’s oil prices are unlikely to be around $50-$60 a barrel. However, he says that the cartel is unconcerned about demand, and prices could be much higher.