CCTV Transcripts

CCTV Script 05/10/22

— This is the script of CNBC's financial news report for China's CCTV on October 5, 2022.

What the market is most concerned about, and has yet to learn, is how much and for how long this production cut will be. Expectations vary, but overall, OPEC+, led by Saudi Arabia and Russia, is expected to push for production cuts of 1 million to 2 million barrels per day, or more. If that comes to pass, it would be by far the largest since early in the coronavirus pandemic.

Analysts at Energy Aspects noted that OPEC+ hopes to boost oil prices by cutting supply before demand shrinks significantly due to concerns about a global economic slowdown and  the effect on consumption growth in emerging markets

The market reacted rather quickly. The possibility of a large production cut immediately pushed up WTI and Brent crude futures prices. Brent crude, the international benchmark, rose above $90 a barrel on Tuesday, up about 7 percent since the weekend. But it is still well below the high of $130 per barrel seen at the beginning of the Russia-Ukraine conflict.

If OPEC+'s production cuts lead to a significant, or sustained, rise in oil prices, then this clearly conflicts with the U.S. goal of lowering inflation. Some analysts believe this reflects tensions between Saudi Arabia, the world's largest exporter of crude oil, and the United States, the world's largest consumer of crude oil.

Jeff Currie

Goldman Sachs global head of commodities

"I'd like to argue that, you know, the old oil order is back. OPEC is probably more powerful than it's ever been in its 60-year history since its inception. And one of the key reasons, really is the fact that we have not been investing in alternative energy sources. So they're really the only game in town."

On Tuesday, Biden's press secretary Karine Jean-Pierre said the White House would not comment on any Opec+ moves in advance. She also noted that the US was not considering new releases from the country's Strategic Petroleum Reserve (SPR).

We should also pay attention to whether the cut is as regard to existing production or quota levels. Some analysts point out that if the reduction is quota levels, rather than existing production, then the impact on international oil prices will be relatively limited.

The latest data from the international energy and commodity price assessment agency, Argus, shows that in August, the 10 OPEC members and nine other non-OPEC oil producers actually produced a total of 3.41 million barrels less than their scheduled quotas. That means that for those countries that were already producing less than their quota, their actual production would likely not have been affected much if the cut was to their quota.

We will learn the final decision of this meeting tonight. We will also keep you posted on the supply and demand dynamics and price fluctuations in the international energy markets.