OPEC Plus' action last week suggests it wants oil to hover around $90 a barrel

It's tempting to dismiss the decision by the OPEC Plus group to cut crude oil production by 100,000 barrels per day (bpd) in October as a statistical insignificance that will likely have zero real market impact.

While it's true that the tiny adjustment to the producer group's output targets won't make a big difference to the global supply-demand balance, last week's announcement does have significance: It signals OPEC Plus' intent to defend crude oil prices.

OPEC Plus, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, said it would reverse September's 100,000 bpd boost to output in October, a move aimed at supporting prices.

While the group doesn't explicitly state its preferred price level, from their current and recent actions it's likely that somewhere above $90 a barrel is the target.

The problem for OPEC Plus is that aiming for this level now, as the world economy likely heads into an energy price-led recession, raises the risk of being forced to take stronger action to defend $50 in six months time after demand is smashed.

OPEC Plus likely based their October decision on the view of the group's technical committee that the market is likely to experience an oversupply of about 400,000 bpd this year, before moving to a small deficit of about 300,000 bpd in 2023.

Messaging from some of the OPEC Plus leaders, including Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud, has been that the paper crude market has been volatile in thin trade, and is pricing in a decline in demand not evident in the physical market.

This may well be a valid argument in the current circumstances. But the risk is that by the time midwinter hits the northern hemisphere, the situation is entirely different.

Europe is likely heading for a recession as the cost of energy soars in the wake of the loss of Russian pipeline supplies of natural gas as part of the fallout from Moscow's Feb. 24 invasion of Ukraine. Russia calls its actions there "a special operation."

The surge in natural gas and liquefied natural gas (LNG) prices has had the flow-on effect of boosting thermal coal to record highs. It has also kept diesel prices elevated.

Surging prices have already forced energy-intensive industries in Europe, such as metal smelters, to shut down or curtail output.

Russell is a columnist for Reuters.