OPEC says supply surplus was main reason for oil production cut

(Bloomberg) – An excess of supply in the oil market was the main reason for OPEC+ opting to cut production earlier this month, according to the group’s secretary-general.

“We see a surplus in the fourth quarter,” Haitham al Ghais told reporters at the Adipec energy conference in Abu Dhabi. “We also see a surplus also in early parts of 2023 because of the great uncertainties surrounding the economic growth forecasts. That was the main reason we took the decision to be proactive.”

On Oct. 5, the Organization of Petroleum Exporting Countries and its partners – a 23-nation alliance led by Saudi Arabia and Russia – angered the US by announcing they would lower their output targets from November by 2 million barrels a day.

US President Joe Biden said there would be “consequences” for the Saudis. His top energy diplomat, Amos Hochstein, who also attended Adipec on Monday, has said there was no economic rationale for the cut.

Al Ghais said it was possible the global economy was already shrinking.

“Whether it will be severe or not is another issue,” he said. “Europe is definitely in a recession; the US is potentially heading toward recession. These economic things will have impact on oil demand.”