The group of oil producers known as OPEC Plus will decide on Wednesday whether to act to cool oil markets, just over two weeks after President Biden visited Crown Prince Mohammed bin Salman of Saudi Arabia in hopes of securing assurances that the group would increase oil production.
In July and August, the group agreed to increase production, raising output to roughly prepandemic levels. But global oil supply is still low, and high energy prices have led to skyrocketing inflation around the world.
As economic growth slows and central banks raise interest rates to fight inflation, concerns about weaker demand for energy could discourage the cartel from raising production significantly or at all, analysts said.
Ed Morse, the global head of commodities research at Citigroup, said he did not expect any substantial production changes to come from the group’s latest meeting. “They may say that prices look like they have peaked and are on their way down, and that they’re quite sensitive to a potential recession,” he said. “Demand is a significant part of the equation.”
Already, higher oil prices have dampened demand in the United States, Europe and Asia, he said.
Oil prices are down from recent peaks, but remain high, with Brent crude, the international benchmark, trading at just under $100 a barrel and West Texas Intermediate, the U.S. benchmark, trading at around $93 a barrel, buoyed by sanctions on Russia, an OPEC Plus member. A year ago, both were trading at between $60 and $70 a barrel.
Caroline Bain, the chief commodities economist at Capital Economics, said she expected the group to announce a modest increase in output over the next few months. An increase from Saudi Arabia and the United Arab Emirates, the two OPEC countries with spare capacity, would help offset drops in production from Angola, Nigeria and Libya, she said.
The group’s influence on oil markets has limits. Many of its 23 members are already missing production targets because of a lack of investment in production capacity.
Ms. Bain said increased output from the group, combined with lower demand because of a looming recession in Europe and a slowdown in the United States, would help drive prices lower, potentially to $80 a barrel for Brent.
“We’ve not only got lower growth on the horizon, but we’ve also got high inflation, which is going to eat into disposable incomes and give people less money to spend on discretionary goods and travel,” she said. “If you’re a family of four, you maybe won’t go for a drive to the seaside because it’s going to cost so much.”