London (CNN Business) OPEC said Monday it would reduce oil production next month, the cartel's first output cut since the depths of the pandemic, as it braces for a global economic slowdown to hit demand.
The Organization of the Petroleum Exporting Countries and allied oil producing nations, including Russia, agreed to shave 100,000 barrels per day off their production targets in October.
Just a month ago, the OPEC+ group agreed to increase production in September by the same small amount — equivalent to about 0.1% of global demand — after coming under intense pressure from the United States and other big oil consumers to do more to bring down energy prices and inflation.
OPEC+ agreed to "revert to the production level of August 2022 ... noting that the upward adjustment of 0.1 [million barrels per day] to the production level was intended only for the month of September 2022," the group said in a statement.
Brent crude futures — the global benchmark — traded up 3.6% to $96.40 a barrel at 8.45 am ET on Monday.
But a drop of more than 20% in global oil prices since the beginning of June — US oil prices fell by 7% in the last week alone — has focused producers on the risk that a sharp economic slowdown in China, the United States and Europe will sap demand for their barrels.
US gasoline prices have also been on the skids, with the national average for a gallon of regular unleaded falling from above $5 in the middle of June to $3.79 on Monday.
In its August market report, OPEC cut its own estimate of global demand for the cartel's crude oil by 300,000 barrels per day for 2022, and by the same amount for 2023.
The Paris-based International Energy Agency said last month that the rapid spike in oil demand triggered by the easing of pandemic restrictions was fading, and would drop to a barely noticeable 40,000 barrels per day in the fourth quarter of this year.
Russian supply has also held up better than many predicted in the face of Western sanctions, with millions of barrels per day being diverted to China and India. Russian oil production was just 310,000 barrels per day below pre-war levels in July, according to the IEA.
The impact of an attempt by G7 nations to cap the price at which Russia can sell oil remains unclear, although Moscow has already said it will suspend supplies to countries that go along with it.
Also feeding into OPEC's thinking: a possible increase in supply if Iran is able to agree on a new nuclear deal with the United States and Europe that would ease sanctions on its exports.