OPEC+ decisions are crucial to market stability

According to the Energy Ministry of Oman, OPEC+ decisions are based solely on market realities and supply and demand dynamics.

“The recent decision of OPEC+ to cut production is in line with its previous decisions in terms of its reliance on market data and its variables, which was important and necessary to reassure the market and support its stability. The working mechanisms of the OPEC+ group require that its decisions be taken by consensus and unanimity of all member states,” the ministry said in a tweet posted on Sunday.

Bahrain’s Minister of Oil and Environment and Special Envoy for Climate Affairs, Mohamed bin Mubarak bin Dainah, also endorsed the OPEC+ decision to reduce oil production by two million barrels per day in November and said the decision was reached after consultation with all of the alliance’s member states.

“The decision was made following specialised technical studies related to global oil market developments,” he said. The OPEC+ coalition, which consists of 23 members, decided to reduce its production in November by 2 million barrels per day, the largest reduction in output since the coronavirus pandemic began in 2020.

The group’s first in-person meeting since March 2020 was held in Vienna, after which the statement announcing the decision was released. Although Oman is not currently a member of OPEC, it is a part of the 23-member OPEC+ group.

Oman’s Sultan Haitham earlier this year stated that the nation intended to use money from increased oil prices to pay down its public debt and boost expenditure on government projects, all the while making sure that inflation did not have an impact on the pricing of essential commodities. Oman, which produces less crude than its Gulf neighbours, is more vulnerable to fluctuations in the price of oil and was severely affected by the pandemic. However, the government deficit was reduced thanks to fiscal measures and increasing oil prices.

The decision to reduce output was made in “[the] light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive and pre-emptive”, Opec+ said. The action is the latest attempt by the group of oil producers to support prices as the forecast for fuel demand is severely hampered by the possibility of an economic slowdown.

Two-thirds of the world’s oil is measured by Brent, which fell 3.11 percent on Friday to close at $91.63 per barrel. The benchmark for US crude, West Texas Intermediate, closed down 3.93 percent to $85.61 per barrel. As markets grow concerned about demand moving into 2023, prices have fallen from a peak of over $140 per barrel in March to about $90 this October.

As it prepared for a coronavirus-caused drop in oil prices, the Opec+ coalition decided in the spring of 2020 to collectively reduce petroleum output by a record 9.7 million BPD. After that, during the previous two years, the alliance steadily undid the cuts.