This week, oil prices have slumped to their lowest level since before the war in Ukraine. This comes after Saudi Arabia and other OPEC countries were reported to be discussing an output increase, as well as China tightening its COVID restrictions. These recent scenarios will potentially soften the overall demand outlook.

The cartel of 13 oil-producing countries and 10 of its closest allies, known as OPEC+, is said to be considering an output increase of 500,000 barrels per day ahead of the EU’s embargo on Russian oil. This news, reported by the Wall Street Journal, was the main detail behind the price slump.

The aim of this output increase would be to maintain a resilient supply chain. However, with such negativity in crude now, all eyes are watching what OPEC+ will actually do when it meets on December the 4th. This tension is especially present considering that, at OPEC+’s prior meeting, it agreed to slash production by 2 million barrels per day. The reasoning behind this cut was to boost Brent and U.S. crude prices, which had fallen sharply from their March highs.

Meanwhile, China saw its first COVID-related deaths in almost six months over the weekend. This follows residents of some areas of Shijiazhuang, a city with a population of 11 million based near the capital, asking residents to stay home amid an outbreak. This has sparked global fears of a further wave of restrictions on the world’s largest oil importer. Furthermore, Thursday saw China’s highest-ever spike in COVID cases, with 31,000 infections being reported, although this is still a relatively small number when compared to the overall population.

Also in the news this week was Goldman Sachs Group lowering its fourth-quarter forecast for Brent crude by $10 to $100 a barrel. A significant fall in oil prices may not be what oil-producing companies want, but it is certainly what the global economy needs. Particularly the economies of developed countries, as businesses and consumers alike battle a toxic combination of ballooning inflation, powered by soaring energy costs, and repeated sharp increases in interest rates to attempt to combat this trend. All of these factors point to a severe and prolonged global recession.

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