OPEC cuts down production target for fifth time since April

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Citing economic challenges such as high inflation and interest rate increases, since April and for the fifth time, OPEC (The Organization of the Petroleum Exporting Countries) cut its forecast for 2022 global oil demand growth - cutting down next year’s figure as well. 

"The world economy has entered a period of significant uncertainty and rising challenges in the fourth quarter of 2022," OPEC said in its report, including the fact that oil demand in 2022 will rise by 2.55 million barrels per day, amounting to 2.6% - down 100,000 bpd from the previous forecast. 

"Downside risks include high inflation, monetary tightening by major central banks, high sovereign debt levels in many regions, tightening labor markets, and persisting supply chain constraints."

This report comes right before OPEC and its allies, known as OPEC+, are set to convene on December 4 to set policies on their agenda - part of which included recent production cuts. 

The group, which Saudi Arabia's energy minister quoted saying last week as saying that they will remain cautious, made a 100,000-barrel-per-day cut to the OPEC+ production target for October, with an even bigger one due in November. The report further emphasized that OPEC output fell by 210,000 barrels per day in October alone to 29.49 million, more than the vowed OPEC+ reduction.

The US is concerned that OPEC's probable decision to reduce oil production will pose serious problems for the country and may even be interpreted as a hostile act, according to a US Treasury report. The Biden administration assembled its top energy, economic, and foreign policy officials and entrusted them with lobbying Middle East allies, such as Saudi Arabia, the United Arab Emirates, and Kuwait to vote against decreasing oil production.

The Saudi Foreign Minister, Prince Faisal bin Farhan, stated in October that the OPEC+ decision was solely economic and had no political implications. He also said in an interview with Saudi-owned Al Arabiya television that the coalition aims to stabilize energy markets and advance the interests of producers and consumers. He added that relations with the US are long-standing and strategic, claiming that military cooperation between the two countries has contributed to peace and stability in the region.