3rd Oct 2022 – OPEC+ Mulls large cuts to tell that it is not the prices cycle you used to see

Walid Salah Eldin

Active member
Oil prices opened the first session of this new month and quarter on upside gaps, before adding more gains during this session on rumors about OPEC+ mulling of new oil production cut can reach 1m bpd, after last month first cutting decision since Covid-19 crisis by only 100k has started to be in act from the beginning this month.

OPEC+ which is much more backed by conviction with Russia than OPEC is looking now stronger and more liberal in taking their decisions than before, when it was carrying most of the global economic recovery costs by enduring Oil prices at 30s or may be lower below the cost of producing to boost economic demand for recovery can later help the prices.

Now it is not looking the same cycle we used to see, as the energy minister of Saudi Arabia the prince Abdelaziz bin Salman said last August within WTI slide to 80s Area by direct and clear way that these prices do not reflect the market fundamentals, after the Ukrainian crisis and the group will look into cutting production in September and they did by 100k initially in September meeting.

After they were raising the production monthly by 400k per day since the beginning of August 2021 reaching their maximum known capacity under continued pressure from Europe and Biden’s administration which decided to anchor the prices by releasing 1m of its inventory daily for 6 months from the beginning of last May and now we are nearly only one month ahead before the end of this period with no new signal about new oil offering from US.

While the Fed is still keeping playing its role in containing the inflation pressure by raising rates showing higher readiness to recession, as you could listened recently from Fed officials.

Cleveland Fed President Loretta Mester said on Monday that if there is an error to be made, better that the Fed do too much than to do too little.

Fed’s Charles Evans said he was getting concerned about going too far, too fast with rate hikes but it is in line with his expectation of reaching 4.50% at the end of 2022.

Neel Kashkari said the central bank is moving “very aggressively” and that there is a high risk of “overdoing it.”

Boston Fed President Susan Collins said, per Reuters, “Getting inflation down will require slower employment growth, somewhat higher unemployment rate”.

While The Fed’s Chief Powell’s comments are still getting hawkish and hawkish just shy of saying that we accept the recession as a price of containing inflation and we work our policy for cooling down the economic as much as we can meanwhile.

But the FOMC’s members’ last released forecasts could say that by much clearer way, when they raised their forecasts of Fed the Fund rates further with the unemployment rate and both of PCE and Core PCE, lowering their growth forecast than they did last June adding strength to the Greenback and woes to the US equities.

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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