US lawmakers are also considering a so-called NOPEC bill—"No Oil Producing and Exporting Cartels"—which would end the sovereign immunity that has shielded OPEC+ members and their state oil companies from lawsuits. Biden’s comments came after OPEC+ members agreed on Wednesday to reduce the group’s official production quotas by 2 million barrels per day starting November.


Brent crude has now risen around 7.5% this week and is up around 13%from its recent low on 26 September. The recovery has been driven by reports indicating that the group was set to deliver a significant output cut; an ongoing strong decline in US crude and refined product inventories; and more positive risk sentiment in financial markets.


Despite the recent rally, we still believe higher prices are needed to slow down oil demand growth amid limited supply growth.

  • The headline production cut is set against the August baseline level. As some members of the alliance, such as Russia, already produce below the new, lower-cap level, the effective reduction in real barrels is less but still significant. According to the Saudi energy minister, Prince Abdulaziz bin Salman, the actual cut is around 1–1.1mbpd.
  • The new production-cap levels are valid until end-2023, and while ministerial meetings are now only planned to take place every six months, the group can call an extraordinary meeting if market conditions warrant it. In our view, the group will likely be slower in adjusting its policy (i.e., hiking production) in case of supply disruptions in Russia.
  • Amid lower OPEC+ crude production, and with oil demand benefiting from gas-to-oil switching for electricity generation this winter, and the European ban on waterborne Russian crude imports coming into force on 5 December, we expect the oil market to tighten further. At present, sales of oil from OECD nation strategic reserves are also due to end later this year. Oil inventories continue to fall, and we expect only modest growth in US shale oil, with producers still focused on capital discipline.

We continue to hold a positive outlook for oil prices and expect Brent to move above the USD 100/bbl mark over the coming quarters. We continue to advise risk-taking investors to add long positions in longer-dated Brent oil contracts or to sell Brent’s downside price risks. We retain our most preferred stance on global energy equities, a key component within the value sector.


Main contributors - Mark Haefele, Vincent Heaney, Giovanni Staunovo, Alessia Stilli.

Content is a product of the Chief Investment Office (CIO).

Read original report - US mulls options to counter OPEC+ output cut, 7th October 2022.