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Oil Surges After Russia Proposes 1 Million Barrel OPEC+ Output Cut

Oil Surges After Russia Proposes 1 Million Barrel OPEC+ Output Cut

Yesterday, as oil prices were tumbling to fresh 2022 lows despite a major hot war taking place and collapsing energy CapEx which virtually assures a crippling energy crisis in the next 5-10 years, we asked if OPEC+ would "wait until tomorrow to drop the output hammer or will they go today."




Does OPEC+ wait until tomorrow to drop the output hammer or will they go today


— zerohedge (@zerohedge) September 26, 2022

Well, they waited until tomorrow, because moments ago Reuters reported that following recent media reports that Saudi Arabia and Russia would likely cut output if Brent drops below $90, OPEC+ dropped the trial balloon of what comes next:



  • RUSSIA WILL LIKELY PROPOSE OPEC+ REDUCES OUTPUT BY AROUND 1 MLN BPD AT NEXT MEETING - SOURCE FAMILIAR WITH RUSSIAN THINKING

As Oilprice adds, the news comes just a day after comments made at Monday's APPEC's oil conference that suggested global oil stocks are set to rise next year amid weak demand and a strong dollar—and that OPEC would have to cut output if they wanted to keep prices from falling further.



OPEC would have to make oil cuts between 500,000 and 1 million bpd to keep Brent above $90 per barrel, Gary Ross, chief executive of Black Gold Investors, said at the meeting on Monday.



Now Russia itself could recommend a million bpd cut—and as one of the two largest members of the OPEC+ group, the county's recommendations hold weight.



The next OPEC+ meeting will be held on October 5, which will determine the output targets for November. It is also in November when the current batch of U.S. SPR releases, which have helped to prop up low oil inventories, will cease.



OPEC+ cut production targets for October by 100,000 bpd at the previous meeting, demonstrating its willingness—to respond to the changing oil markets in an expeditious manner.



And since most other OPEC+ sources will agree with Russia, oil has spiked with WTI surging more than 3% from $77.8 to just shy of $80.





And while Biden is still draining the SPR at an accelerated pace to minimize the Democrat rout in November, oil will likely fluctuate for the next two months at which point it will explode higher as the new post-SPR drain reality finally kicks in.



Tyler Durden
Tue, 09/27/2022 - 10:03