The Al-Gharraf oil field in Iraq's southern Dhi Qar Governorate, on August 24.

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Abu Dhabi, UAE CNN  — 

Major oil producing states are bracing the world for the biggest cut in oil production since the pandemic.

The OPEC oil cartel and its allies, including Russia, will reportedly consider cutting output by more than 1 million barrels per day (bpd) at a meeting in Vienna on Wednesday.

Oil prices climbed by as much as 4%, with benchmark Brent crude futures trading at about $88.60 a barrel on Monday, on expectations that OPEC will try to regain control of prices. Oil analysts say that if such a large cut is agreed on Wednesday, crude prices could rise significantly higher, impacting everything from the cost of gasoline at the pump to goods and services.

The group, known as OPEC+, controls more than 40% of global oil production. For years it has coordinated output policy in an attempt to ensure markets have sufficient supply at a price its members can live with. But events this year, including sanctions on Russia, and speculation about a looming global recession, have chipped away at its ability to influence the market.

As recently as this summer, Western states were imploring Arab oil producers to raise output due to high oil prices, calls that were largely rebuffed. Since then, prices have dropped significantly on the back of global recession fears and lockdowns in China.

This year alone, oil prices fluctuated from $139 per barrel in March to around $85 in September, according to Reuters.

“After a year of tolerating extremely high prices, missed targets and severely tight markets, the alliance seemingly has no hesitation when it comes to acting rapidly to support prices amid a deterioration in the economic outlook,” wrote Craig Erlam, a senior market analyst at Oanda, a brokerage firm.

A potential cut in production of 1 million bpd would send a global signal that OPEC+ wants to regain control of a market that it believes has deviated from the fundamentals of supply and demand, say analysts.

Last month, OPEC+ agreed to cut production for the first time since the pandemic, but only shaved off a symbolic 100,000 bpd. The move was seen by analysts as a warning to the market and the external players that they could take a more aggressive stance if required.

The decision was meant to show that the alliance will “use all of the tools in our kit,” said Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman in a September interview with Energy Intelligence, adding that OPEC+ is “proactive in terms of supporting the stability of the market.”

“It was a message that they can cut, and that they can cut at any time,” said Amena Bakr, chief Opec correspondent at Energy Intelligence, an energy information company. “There is a force or a pull from consumer states that is distorting the market,” she told CNN, referring to Western states’ calls for a cap on the price of Russian oil and fears of a global recession, both of which are fueling speculation.

A cut as large as 1 million barrels per day is “plausible,” said Herman Wang, managing editor of OPEC and Middle East energy at S&P Global Commodity Insights, adding that there in consensus in OPEC+ that the price drops are worrying.

Wang, however, sees a discrepancy between OPEC+ concerns about the direction of oil prices and their own forecasts.

He said that OPEC+’s narrative has been that there is a large disconnect between speculators and market fundamentals – where inaccurate forecasts about slowing demand in the future have lowered prices. The alliance, however, believes demand is healthier than speculators suggest, and that the current low prices are based on distorted market estimates, he told CNN.

OPEC’s own forecast suggests that an uptick in demand is expected by the fourth quarter of this year, which could raise prices, said Wang.

Iran protests

Western depictions of the protests taking place in Iran following the death of Mahsa Amini are “a new conspiracy to prevent the country from progressing” and have “failed,” Iranian President Ebrahim Raisi said Sunday.

“In Iran, the issue of Miss Amini’s death is being followed up completely and carefully and all the officials have emphasized it, but at the same time, the enemy is trying to divert public opinion,” Raisi said during a meeting of the Supreme Council for the Promotion and Development of the Culture of Sacrifice and Martyrdom, according to a statement published by his office.

Videos posted on social media over the weekend showed that protests, which have entered their third week, are not letting up in various parts of the country, including in Tehran. Many university students have been among the protesters and have been calling for more freedoms; often chanting against the regime.

Here’s the latest on this developing story:

  • Security forces used “guns, paintball guns, batons and … gasses” to violently crack down on protests being held by students at Sharif University in Tehran on Sunday, according to an eyewitness and social media video.
  • Nine foreign nationals were among at least 1,200 people arrested as demonstrations continue across 40 Iranian towns and cities, according to state media. The arrests included citizens of Germany, Poland, Italy, France, the Netherlands and Sweden.
  • Amnesty International said it has obtained leaked official Iranian documents which revealed Iran’s highest military body instructed the commanders of armed forces to “mercilessly confront” protesters.
  • Casualties were reported in Zahedan, the capital of Sistan and Balochistan province in southeast Iran, during protests against security forces, an organizer of Baloch Activists Campaign told CNN.

The digest

Iran, US prisoner swap mediated by regional state – Nournews

A regional country has mediated between Iran and the United States for the “simultaneous release of prisoners,” Reuters cited Iran’s Nournews as saying on Saturday, shortly after Tehran allowed Siamak Namazi, an Iranian-American businessman, out of prison on a one-week furlough. It also said that “billions of dollars of Iran’s frozen assets because of the U.S. sanctions will be released soon.”

  • Background: Iran said in August it was ready to swap prisoners with the US, after Secretary of State Antony Blinken tweeted that “Namazi had now spent 2,500 days wrongfully detained” in Iran, and Washington was determined to secure the freedom of all Americans held by its Middle East adversary.
  • Why it matters: Tehran has sought the release of over a dozen Iranians in the US, including seven Iranian-American dual nationals, two Iranians with permanent US residency and four Iranian citizens with no legal status in the US.

Turkey rejects Russia’s annexation of Ukrainian territory

Turkey’s Foreign Ministry said on Saturday it rejects Russia’s annexation of four regions in Ukraine, adding the decision is a “grave violation” of international law, Reuters reported. The ministry said it had not recognized Russia’s annexation of Crimea in 2014, adding that it now rejects Russia’s decision to annex Donetsk, Luhansk, Kherson and Zaporizhzhia.

  • Background: Russian President Vladimir Putin proclaimed the annexation of the regions on Friday, and the country’s parliament began rubber-stamping the move Monday. The proclamation came after Russia held what it called referendums in occupied areas of Ukraine. Western governments and Kyiv said the “sham” votes breached international law and were coercive and non-representative.
  • Why it matters: Turkey, a NATO member, has conducted a d