OPEC+ meet later today to discuss their output policy for November. It is pretty clear that the group will need to cut at their meeting and expectations about the scale of the supply reduction are growing. Initially, it was suggested that the group could reduce production in the region of 1MMbbls/d, however, there are now suggestions that OPEC+ could cut by as much as 2MMbbls/d. It is important to remember that these are paper cuts and that actual cuts would be much smaller. However, if OPEC+ were to announce a paper cut of as much as 2MMbbls/d, it would work out to an actual output decline in the region of 1MMbbls/d, which would mean that the surplus we expect for the rest of this year would likely disappear. This would provide a solid floor to the market. The group will need to manage expectations, if for some reason they announce a paper cut of less than 1MMbbls/d we could see an immediate downward correction in prices.
The US Treasury is expecting that the price cap on Russian oil will be formally announced in the coming weeks. EU members are currently working towards an agreement on the cap, however, concern from certain EU members has meant that talks have dragged on. The European Commission still wants to reach a preliminary agreement before EU leaders meet on 7 October.