Frankfurt, Germany — The OPEC+ alliance of oil-exporting nations decided on Wednesday to sharply cut production to support lower oil prices, a move that could deal another blow to the faltering global economy and push up politically sensitive pump prices for US drivers ahead of the key national deadline. elections.
Energy ministers cut production more than expected by 2 million barrels per day starting in November after their first face-to-face meeting at the Organization of the Petroleum Exporting Countries’ headquarters in Vienna since the COVID-19 pandemic began.
The group said the decision was based on “the uncertainty surrounding the outlook for the global economy and the outlook for the oil market.” Saudi Energy Minister Abdulaziz bin Salman emphasized the group’s stated role as a guardian of stable energy markets.
“We are here to remain as a moderating force for stability,” he told reporters.
Oil is trading well below its summer peaks due to concerns that major global economies such as the United States or Europe will sink into recession due to high inflation, high interest rates and energy uncertainty due to Russia’s war in Ukraine. The OPEC+ decision may help member Russia bypass a looming European embargo on most of Moscow’s oil, but its impact will have some limitations as the alliance member states cannot already meet their quotas.
our president Joe Biden White House Press Secretary Karen-Jean-Pierre told reporters on Air Force One, Karen-Jean-Pierre, that the OPEC+ decision was “short-sighted at a time when the global economy is dealing with the ongoing negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine”.
“Obviously, OPEC+ is in line with today’s announcement,” she said.
Bin Salman dismissed questions indicating the reaction in Washington or implying that OPEC was helping Russia, saying the discussion was in a non-political “silo” where the focus was on the prudent management of oil markets.
After reducing the symbol last month, Wednesday’s decision is a surprising turnaround from months of restoring deep cuts made during the depths of the pandemic. With demand picking up, global energy prices have fluctuated dramatically since Russia’s invasion of Ukraine, helping to fuel inflation that is pressing economies around the world.
Part of the OPEC+ cuts are “on paper” because members can’t already save enough oil to hit their allocations, said Gary Beach, oil markets analyst at Energy Intelligence. “About half of that are only real barrels,” he said.
Petsch said a cut in the oil price near $90, which is “a price that’s right for all producers,” may not satisfy customers, but oil ministers are “looking into the slack tunnel” that could lower demand in the coming months. “They decided to anticipate it.”
The recent drop in oil prices has been a boon to American drivers, who have seen gasoline prices drop at the pump before costs recently started to rise, and for Biden as his Democratic Party prepares for next month’s congressional elections.
Biden tried to get credit for gasoline prices that have fallen from the June average peak of $5.02 — administration officials highlighted the late March announcement that 1 million barrels per day would be released from the strategic reserve for six months. High inflation is a major impediment to Biden’s approval and has reduced the Democrats’ chances in the midterm elections.
Oil supplies may face further cuts in the coming months when a European ban on most Russian imports takes effect in December. A separate move by the United States and other members of the Group of Seven wealthy democracies to cap the price of Russian oil could reduce supply if Russia retaliates by refusing to ship to countries and companies that adhere to the cap.
On Wednesday, the European Union approved new sanctions that are expected to include a ceiling on Russian oil prices, with the aim of starving Putin’s country of money in exchange for his war machine. It comes amid an energy crisis triggered by Russian cuts to natural gas supplies to Europe, whose leaders accuse Moscow of retaliating for their support of Ukraine and imposing sanctions.
Analysts at Commerzbank said Russia “will need to find new buyers for its oil when the European ban comes into effect in early December, and will presumably have to make further price concessions to do so.” “Already high prices – backed by production cuts elsewhere – would undoubtedly therefore be very welcome.”
International benchmark Brent crude has fallen as low as $84 in recent days after spending most of the summer months above $100 a barrel. US crude rose to $87.64, and global benchmark Brent rose to $93.21 after the decision.
Associated Press reporters Chris Mejerian and Josh Boak contributed in Washington.