“Not that big a deal,” said Rusty Braziel, executive chairman of RBN Energy, another Houston consulting firm. But, he added, “an OPEC Plus cut will definitely impact the market, just by the signal it sends that OPEC Plus stands ready to cut production to keep the price of oil from falling.”
Gyrating prices in oil markets have become familiar in recent years.
During the 2008-9 financial crisis, prices dropped to $35 a barrel from $145 in only five months. In 2014-15, as economic growth slowed, oil dropped more than 50 percent in nine months, to $45 a barrel. Prices climbed again until the Covid-19 pandemic hit, when demand collapsed. In a matter of hours, they briefly crashed to below zero from $18, as producers were forced to pay buyers to take oil they had no room to store.
With their economies at stake, Saudi Arabia and its allies have aimed to stabilize the market as the world slowly recovers from the pandemic. After cutting nearly 10 million barrels a day of production during the pandemic, OPEC Plus gradually restored output until last month, when it announced a small decrease.
“OPEC Plus wants $100 oil,” said Scott Sheffield, the chief executive of Pioneer Natural Resources, a major oil company in Texas. Mr. Sheffield predicted that oil would stabilize at $90 to $100 a barrel and stay there for as long as a slowing economy kept demand down. “There will be a small increase at the pump,” he said.
After reports of a prospective OPEC Plus production cut made headlines over the weekend, the price of West Texas intermediate, the American benchmark, rose 5 percent on Monday and another 2 percent on Tuesday, but is still around $85, roughly where it was weeks before the invasion of Ukraine. Brent crude, the global benchmark, is around $90.
The average price of a gallon of regular gasoline has declined to $3.80 from just over $5 on June 14, according to the AAA auto club, although it has climbed a bit in recent days.
Over most of this year, the Biden administration, with limited success, urged Persian Gulf countries to pump more. While Mr. Biden has pushed to lower prices at the pump, the Saudis have been more concerned that prices are going too low and that global spare capacity is insufficient at a time of global instability.