The largest production cut since the start of the pandemic, 2 million barrels per day, was announced by OPEC+(Organization of the Petroleum Exporting Countries) on October 5th. This action raises the possibility that gasoline prices would increase. Following its first in-person meeting since March 2020, the group of major oil producers—which includes Saudi Arabia and Russia—announced the reduction in production. The decrease amounts to around 2% of the world’s oil demand.
Energy analysts think that Saudi Arabia, the leader of OPEC and a close ally of the United States, may end up paying for the drastic production cuts, especially in light of Biden’s indication that Congress will soon try to limit the influence of the Middle East-dominated organization over energy pricing. In response to the announcement, the price of Brent crude oil increased by 1.5% to over $93 per barrel. US oil was up 1.7% at $88.
In a statement released on Wednesday, the Biden administration slammed the OPEC+ move, calling it “shortsighted” and asserting that it will particularly harm low- and middle-income nations that are already having a difficult time dealing with high oil prices.
The Organization of Petroleum Exporting Countries (OPEC) and its partners will meet once again in December after the production restrictions begin in November. The business stated in a statement that it had made the choice to reduce output “in light of the uncertainty that surrounds the global economic and oil market outlooks.”
On concerns that a worldwide recession may reduce demand, the price of oil has declined considerably globally since it spiked in the first half of the year. Since the end of June, Brent crude has declined about 20%. Following Russia’s invasion of Ukraine in March, the international benchmark reached a high of $139 per barrel. Over 40% of the world’s oil production is controlled by OPEC and its allies, who want to avoid seeing demand for their barrels decline as a result of a dramatic economic downturn in China, the US, and Europe.
Russia’s production has outperformed expectations, with supplies going to China and India instead. But the United States and Europe are now working on ways to implement a G7 agreement to cap the price of Russian crude exports to third countries.
Prior to their conference in Vienna, the oil cartel was under strong pressure from the White House as President Biden sought to decrease energy costs for US consumers. According to authorities, senior members of the Biden administration lobbied their counterparts in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) to vote against reducing oil production.