Breaking News
Investing Pro 0
Cyber Monday Extended SALE: Up to 60% OFF InvestingPro+ CLAIM OFFER

OPEC+ agrees deep oil production cuts, Biden calls it shortsighted

Commodities Oct 05, 2022 16:38
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

By Ahmad Ghaddar, Alex Lawler and Rowena Edwards

VIENNA/LONDON (Reuters) - OPEC+ agreed steep oil production cuts on Wednesday, curbing supply in an already tight market, causing one of its biggest clashes with the West as the U.S. administration called the surprise decision shortsighted.

OPEC's de-facto leader Saudi Arabia said the cut of 2 million barrels per day (bpd) of output - equal to 2% of global supply - was necessary to respond to rising interest rates in the West and a weaker global economy.

The kingdom rebuffed criticism it was colluding with Russia, which is included in the OPEC+ group, to drive prices higher and said the West was often driven by "wealth arrogance" when criticising the group.

The White House said President Joe Biden would continue to assess whether to release further strategic oil stocks to lower prices.

"The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine," the White House said.

Biden faces low approval ratings ahead of mid-term elections due to soaring inflation and has called on Saudi Arabia, a long-term U.S. ally, to help lower prices.

U.S. officials have said part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue. Biden travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy. Relations have been further strained as Saudi Arabia has not condemned Moscow's actions in Ukraine.

The cut in oil supplies decided in Vienna on Wednesday could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

Saudi Energy Minister Abdulaziz bin Salman said OPEC+ had needed to be pro-active as central banks around the world moved to "belatedly" tackle soaring inflation with higher interest rates.

LOWER REAL CUTS

Wednesday's production cuts of 2 million bpd are based on existing baseline figures, which means the cuts would be less deep because OPEC+ fell about 3.6 million barrels per day short of its output target in August.

Under-production happened because of Western sanctions on countries such as Russia, Venezuela and Iran and output problems with producers such as Nigeria and Angola.

Prince Abdulaziz said the real cuts would be 1.0-1.1 million bpd.

Analysts from Jefferies said they estimated the figure at 0.9 million bpd, while Goldman Sachs (NYSE:GS) put it at 0.4-0.6 million bpd saying cuts would mainly come from Gulf OPEC producers such as Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

Benchmark Brent crude rose above $93 per barrel on Wednesday.

The West has accused Russia of weaponising energy, with soaring gas prices and a scramble to find alternatives creating a crisis in Europe that could trigger gas and power rationing this winter.

Moscow, meanwhile, accuses the West of weaponising the dollar and financial systems such as the international payments mechanism SWIFT in retaliation for Russia sending troops into Ukraine in February.

Russian Deputy Prime Minister Alexander Novak, who was put on the U.S. special designated nationals sanctions list last week, also travelled to Vienna to participate in meetings.

Novak is not under EU sanctions. He and other members of OPEC+ agreed to extend the cooperation deal with OPEC by another year to the end of 2023.

The next OPEC+ meeting will take place on Dec 4. OPEC+ will move to meeting every six months instead of monthly meetings.

OPEC+ agrees deep oil production cuts, Biden calls it shortsighted
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email