The likely cut could spur a recovery in oil prices that have dropped to about US$90 from US$120 three months ago due to fears of a global economic recession, rising US interest rates and a stronger dollar.
The cartel that includes Saudi Arabia and Russia, is working on cuts in excess of one million barrels per day (bpd). Reuters reports the cuts could be as high as two million bpd if reductions could include additional voluntary cuts by members such as Saudi Arabia or if cuts could include existing under-production by the group.
OPEC has been under-producing over 3 million bpd and the inclusion of those barrels would dilute the impact of new cuts.
"Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of US midterm elections," Citi analysts said in a note.
"There could be further political reactions from the US, including additional releases of strategic stocks along with some wildcards including further fostering of a NOPEC bill," Citi said referring to a US anti-trust bill against OPEC.
Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and allied producers (OPEC Plus) have said they seek to prevent volatility rather than to target a particular oil price.
The West
has accused Russia of weaponizing energy as Europe suffers from a severe energy
crisis and may face gas and power rationing this winter in a blow to its
industry.
Moscow accuses the West of weaponising the dollar and financial systems such as SWIFT in retaliation for Russia sending troops into Ukraine in February. The West accuses Moscow of invading Ukraine while Russia calls it a special military operation.
A significant cut is likely to anger the United States, which has pressured Saudi Arabia to pump more to pressure oil prices and reduce revenue for Russia.
Saudi Arabia has not condemned Moscow's actions and relations are strained between the kingdom and the administration of US President Joe Biden, who travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy.
Nasser made the remarks on Tuesday during his speech at the Energy Intelligence Forum 2022 in London. He added that the spare capacity amounts to 1.5% of global demand.
The oil market does not focus on the fact that global spare capacity to increase oil production is very low, Nasser said.
He clarified that the market focuses on what will happen to
demand if there is recession in different parts of the world. He also added
that they do not focus on the supply fundamentals.
Nasser stressed that Aramco maintained its market in Asia despite European
demand, while he pointed out that the problem of Europe lies in gas and
liquefied gas due to the lack of spare capacity.
During his speech, Nasser expected that the demand for oil would increase until
2030 and beyond. He also added that Aramco is on track to raise its capacity to
13 million barrels per day by 2027, which would cost billions of dollars.
The Aramco's CEO remarks came about 24 hours before the meeting of the OPEC
Plus meeting that will be held on Wednesday in Vienna, which is its first
attendance meeting since March 2020.
The alliance is expected to reduce production by at least 500,000 barrels per day, while other expectations indicate the possibility of reducing by more than one million barrels per day.
