OPEC+ said on Wednesday Reduces oil production 2 million barrels per day, the biggest cut since the pandemic began, in a move that threatened Raise petrol prices More than a few weeks ago in America Mid-term elections.
The group of major oil producers, which includes Saudi Arabia and Russia, announced the production cut after meeting in person since March 2020. 2% Global oil demand.
Brent crude rose 1.5% to more than $93 a barrel, adding to gains this week ahead of a meeting of oil ministers. US oil rose 1.7% to $88.
The Biden administration criticized the OPEC+ decision in a statement Wednesday, saying it was “short-sighted” and would hurt low- and middle-income countries already struggling with 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.
In a statement, the group said the decision to cut production was made “in light of uncertainty surrounding the global economic and oil market outlook.”
World oil prices rose in the first half of the year, then fell sharply on fears that a global recession would dampen demand. Brent crude has fallen 20% since the end of June. The global benchmark hit a peak of $139 a barrel in March after Russia’s invasion of Ukraine.
OPEC and its allies, which control more than 40% of global oil production, are hoping to stem the fall in demand for their barrels from a sharp economic slowdown in China, the United States and Europe.
Western sanctions on Russian oil also muddy the waters. Russia’s production has been better than forecast, with supplies diverted to China and India. But the US and Europe are now working on ways to implement a G7 agreement to cap the price of Russian crude exports to third countries.
The oil cartel has come under intense pressure from the White House ahead of its meeting in Vienna as President Biden tries to secure lower energy prices for American consumers. Senior Biden administration officials have urged their counterparts in Kuwait, Saudi Arabia and the United Arab Emirates (UAE) to vote against cutting oil production.
The prospect of production cuts was framed as “total disaster” in draft talking points distributed by the White House to the Treasury Department on Monday, obtained by CNN. “It’s important that everyone knows how high the stakes are,” one US official said.
With just over a month to go before critical midterm elections, U.S. gasoline prices have started to climb again, posing a political risk the White House is desperately trying to avoid.
Rising oil prices mean inflation will remain high for longer, and could add pressure on the Federal Reserve to raise interest rates more aggressively.
The impact of Wednesday’s cuts could be a positive signal for oil prices, as many smaller OPEC producers struggle to meet earlier production targets.
“Any announced cut is unlikely to be fully implemented by all countries, as the group is already 3 million barrels a day behind its stated production ceiling,” Rystad Energy analyst George Leon said in a note.
Rystad Energy estimates that the global oil market will remain oversupplied between now and the end of the year, reducing the effect of production cuts on prices.
— Alex Marquardt, Natasha Bertrand, Bill Mattingly, Mark Thompson and Betsy Klein contributed to this report.