Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud and OPEC Secretary General Haitham Al Ghais shake hands at the Organization of the Petroleum Exporting Countries (OPEC) headquarters in Vienna, Austria, October 5, 2022. REUTERS/Lisa Leutner
FRANKFURT: The OPEC+ alliance of oil exporters decided Wednesday to cut production sharply to support falling oil prices.
The meeting of energy ministers at the Vienna headquarters of the OPEC oil cartel was the first face-to-face meeting since the start of the COVID-19 pandemic, cutting production by 2 million barrels per day since November.
In addition to last month’s token cut in oil production, the sharp cuts are a sudden recovery from months of heavy cuts at the height of the pandemic, and ally Russia’s looming European crisis. could help survive the oil import ban.
OPEC+ said in a statement that the decision was based on “uncertainty surrounding the outlook for the global economy and oil markets”.
The impact of production cuts on oil prices, and therefore on the price of gasoline made from crude oil, will be limited to some extent as OPEC+ members have already failed to meet quotas set by the group.
The alliance also said it was renewing cooperation between OPEC cartel members and non-members. The most important of them is Russia. The contract was to expire at the end of the year.
The decision echoes concerns that major global economies such as the United States and Europe will plunge into recession due to high inflation, rising interest rates aimed at keeping consumer prices down, and uncertainty over a war with Russia. Because of this, it takes place well below the summer peak. Ukraine.
Falling oil prices have benefited US drivers, who recently saw gasoline prices fall before costs began to rise, and President Joe Biden, as Democrats gear up for next month’s congressional elections.
White House spokeswoman Carine Jean-Pierre told reporters on Tuesday that the US will not extend releases from its strategic stockpile to increase global supplies.
Mr. Biden is trying to take credit for gasoline prices falling from their average peak of $5.02 in June.Administration officials announced in late March that the strategic reserve would provide 1 million barrels a day for six months. High inflation has fundamentally hampered Biden’s approval, weakening the Democrats’ chances in the midterm elections.
Oil supplies could be further cut in the coming months when Europe bans most imports from Russia in December. Another move by the US and other wealthy democracies in the Group of Seven (G7) to impose a cap on Russia’s oil prices is to retaliate by denying shipments to countries and companies that adhere to the cap. may reduce supply.
The EU on Wednesday agreed new sanctions expected to include a price cap on Russian oil.
“When the EU embargo comes into force in early December, Russia will need to find new buyers for its oil and will probably have to make further price concessions to do so,” Commerzbank analysts wrote in a report. pointed out. Production cuts elsewhere – so definitely welcome. ”
Declining prospects for a diplomatic deal to limit Iran’s nuclear program have also lowered the prospects of up to 1.5 million barrels per day of Iranian oil returning to the market should sanctions be lifted.
Oil prices surged this summer as markets worried about a loss of Russian supplies due to sanctions over the war in Ukraine, but fears of a recession in major economies and China’s COVID-19 restrictions weighed on demand for oil. so it fell.
The international benchmark, Brent, has fallen to $84 a barrel in recent days after spending most of the summer above $100 a barrel.
At its final meeting in September, OPEC+ cut the amount of oil it will produce in October by 100,000 barrels per day. This token cut did not go far enough to boost the drop in oil prices, but it did signal to the market that the group was willing to act if prices continued to fall.