OPEC+ has agreed its deepest cuts to oil production since the coronavirus pandemic, curbing supply in an already tight market despite pressure from the United States and others to pump more.
In a statement after a meeting in Vienna on Wednesday, the global cartel of oil-producing countries announced it would produce 2m barrels less a day.
The move could spur a recovery in oil prices, which have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar.
Al Jazeera’s Dominic Kane, reporting from Berlin, said the effect of the decision is expected to take three weeks to be reflected in consumer prices.
He also said that “some analysts suggest that the US might seek to free up some of the stocks of oil that it holds to try to counteract what OPEC+ is trying to do”.
The US had pushed OPEC not to proceed with the cuts, arguing that fundamentals do not support them, a source familiar with the matter told the Reuters news agency.
US ‘disappointed’
Later on Wednesday, the White House said it was “disappointed” in the OPEC+ decision and called it “shortsighted”.
“At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” it said in a statement attributed to US National Security Adviser Jake Sullivan and Director of the National Economic Council (NEC) Brian Deese.
Sources said it remained unclear if cuts could include additional voluntary reductions by members such as Saudi Arabia, or if they could include existing under-production by the group.
Shortly after the announcement by OPEC, US Secretary of State Antony Blinken said his country’s government was working “to ensure that energy is on the market and the prices are kept low”.
Asked at a news conference in Chile if he was disappointed in US ally Saudi Arabia for agreeing to the cuts, Blinken said Washington has a “multiplicity of interests with regard to 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 US mid-term elections,” analysts of Citi, the leading global bank, said in a note.
In their statement, the Biden administration’s Sullivan and Deese said the US Department of Energy will release 10 million barrels from the country’s strategic petroleum reserve next month to “protect American consumers and promote energy security”.
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.
Weaponising energy
The West has accused Russia of weaponising energy, creating a crisis in Europe that could trigger gas and power rationing this winter.
Moscow accuses the West of weaponising the dollar and financial systems, such as SWIFT, in retaliation for the invasion of Ukraine in February.
Part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue, while Saudi Arabia has not condemned Moscow’s actions.
Relations have been strained between the kingdom and the administration of President Joe Biden, who travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy.
“The decision is technical, not political,” United Arab Emirates Minister of Energy Suhail al-Mazroui told reporters ahead of the meeting.
“We will not use it as a political organisation,” he said, adding that concerns about a global recession would be one of the key topics.
Russian Deputy Prime Minister Alexander Novak, who was put on the US special designated nationals sanctions list last week, also travelled to Vienna to participate in meetings. Novak is not under EU sanctions.
