OPEC+ said on Wednesday it would do so reduce oil production By 2 million barrels per day, the largest reduction since the beginning of the epidemic, in an alarming move Petrol price payment Top a few weeks ago from the United States midterm elections.
The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut after its first meeting in person since March 2020. The cut is equivalent to about 2% Global demand for oil.
Brent crude rose 1.5% to more than $93 a barrel on the news, adding to gains this week ahead of the oil ministers’ meeting. The price of US oil rose 1.7 percent to $88.
The Biden administration criticized the OPEC+ decision in a statement on Wednesday, calling it “short-sighted” and saying it would hurt low- and middle-income countries already suffering from high energy prices.
Production cuts will begin in November, and the Organization of the Petroleum Exporting Countries (OPEC) and its allies will meet again in December.
The group said in a statement that the decision to cut production was taken “in light of the uncertainty surrounding the outlook for the global economy and the oil market.”
Since then, global oil prices, which jumped in the first half of the year, have fallen sharply amid fears that a global recession will dent demand. Brent crude has fallen 20 percent since the end of June. The global benchmark crude peaked at $139 a barrel in March after the Russian invasion of Ukraine.
OPEC and its allies, who control more than 40% of global oil production, are hoping to pre-empt lower demand for their barrels from a sharp economic slowdown in China, the United States and Europe.
Western sanctions on Russian oil are also disturbing the waters. Russia’s production has held up better than expected, with supplies diverted to China and India. But the United States and Europe are now working on ways to implement the G7 agreement to limit the price of Russian crude exports to third countries.
The oil cartel came under heavy pressure from the White House ahead of its meeting in Vienna as President Biden tried to secure lower energy prices for American consumers. Senior officials in the Biden administration have been pressing their counterparts in Kuwait, Saudi Arabia and the United Arab Emirates to vote against cutting oil production, according to officials.
The prospect of production cuts was framed as a “complete disaster” in a draft of talking points the White House distributed to the Treasury on Monday, obtained by CNN. “It is important for everyone to realize how serious the risks are,” said one US official.
With only a month left before the crucial midterm elections, US gasoline prices are beginning to rise again, posing a political risk the White House is desperately trying to avoid.
Higher oil prices could mean inflation stays higher for longer, and increase pressure on the Federal Reserve to raise interest rates more aggressively.
But the impact of Wednesday’s cut, despite a bullish sign for oil prices, may be limited as many of the smaller OPEC producers were struggling to meet previous production targets.
“It is unlikely that all countries will implement any announced cut of any size, as the group is already 3 million barrels per day behind the announced production ceiling,” Rystad Energy analyst Jorge Leon said in a note.
Rystad Energy estimates that the global oil market will see oversupply between now and the end of the year, mitigating the impact of production cuts on prices.
Alex Marquardt, Natasha Bertrand, Phil Mattingly, Mark Thompson and Betsy Klein contributed to this report.
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