OPEC+ decides to reduce oil production despite US pressure
Organisation of Petroleum Exporting Countries (OPEC+) on Wednesday (October 5) agreed to big cuts to oil production. These are deepest cuts in production since 2020 COVID pandemic. The decision was taken at a meeting in Vienna and despite pressure from the US and other to increase production.
The cut in oil production may cause oil prices to rise. The prices have dropped to about USD 90 from USD 120 three months ago.
The United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals don’t support them, a source familiar with the matter said as quoted by Reuters.
The agency said that it was unclear whether cuts would include additional reductions by member countries such as Saudi Arabia.
OPEC+ fell about 3.6 million barrels per day short of its output target in August.
“Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of U.S. mid-term elections,” Citi analysts said in a note.
“There could be further political reactions from the U.S., including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill,” Citi said, referring to a US antitrust bill against OPEC.
JPMorgan also said it expected Washington to put in place countermeasures by releasing more oil stocks.
OIL PRICES RISE
Saudi Arabia and other members of OPEC+ – which groups the Organization of the Petroleum Exporting Countries and other producers including Russia – have said they seek to prevent volatility rather than to target a particular oil price.
Benchmark Brent crude rose towards $93 per barrel on Wednesday, after climbing on Tuesday.
The West has accused Russia of weaponising energy, creating a crisis in Europe that could trigger gas and power rationing this winter.
(With inputs from agencies)
