OPEC+ says growing risk of global recession justifies oil cuts

OPEC+ defended its oil-production cuts, saying they were justified by the growing risk of a global recession.

The group agreed on October 5 to reduce its collective crude-output target by 2 million barrels, sparking condemnation from consumers. But the decision was motivated purely by supply and demand, and the drop in prices since the meeting shows it was the right one, said UAE Oil Minister Suhail Al Mazrouei.

Oil ministers from Congo and Equatorial Guinea reiterated this defense, while OPEC’s top official said the group had little choice but to take preemptive action.

The oil market faces “very real potential for a global recession, which some may say has already started,” OPEC Secretary-General Haitham Al-Ghais said at African Energy Week in Cape Town on Tuesday. “There was a consensus among the ministers regarding the need to act now and prevent a crisis later on.”

In the weeks since the meeting, Saudi Arabia and many other OPEC+ members have repeatedly said the motivation for the cuts was purely economic.

“It was a technical decision, it had nothing to do with politics,” Equatorial Guinea Oil Minister Gabriel Obiang Lima said at the conference in Cape Town on Tuesday. “OPEC’s purpose is only to stabilise the market,” said his counterpart from the Republic of Congo, Bruno Itoua.

Oil prices initially rallied after the OPEC+ agreement, which will only actually remove about 1 million barrels a day from the market because several members are already well below their production targets. Since then, prices have dropped as the weakness of the global economy has come increasingly into focus.

Brent crude, the international benchmark, dropped below $90 a barrel on Tuesday, close to its level the day before the meeting. This fact shows the decision to cut was economically justified, UAE Energy Minister Mazrouei told reporters in Abu Dhabi.

“The proof it was right is that we saw a decrease in prices,” he said.

Read: OPEC+ tries to keep oil above $90 with large production cut