Following weeks of declining oil and gas prices, the OPEC+ coalition on Wednesday approved a 2 million barrels per day reduction in oil production.
The conference of the 24 OPEC+ oil-producing nations, which includes Russia, takes place while a large portion of the world already struggles with skyrocketing energy prices. A supply reduction may also heighten relations between the United States and Saudi Arabia, where President Biden has been attempting to control gas prices ahead of the midterm elections.
The White House called the decision “shortsighted” and said in a statement the administration would “deliver another 10 million barrels from the Strategic Petroleum Reserve to the market next month, continuing the historic releases the President ordered in March.”
The 13 members of the Organization of Petroleum Exporting Countries and 11 additional non-OPEC members make up OPEC+, which was established in 2016. The group cited “uncertainty that surrounds the global economic and oil market outlook” as justification for the decision made today.
How much of a price hike the supply reduction would bring about is unknown. The removal of 2 million barrels from the market would have a significant impact because the globe consumes up to 100 million barrels of oil every day.
The action is viewed as a bid by Saudi Arabia to support prices, which throughout the spring had risen as high as $120 per barrel but started to fall because to worries about a faltering global economy. In September, they declined to less than $90 per barrel.
The fact that this is the alliance’s first in-person gathering since the pandemic started, according to observers, is one indication of its heightened emphasis.
There is a belief that the Saudis are attempting to raise oil prices back to or above $100 per barrel by reducing output and tightening the market, according to Yasser Elguindi, head of macro research at Energy Aspects. He claims that the size of the anticipated cut has surprised people.
According to Elguindi, OPEC+’s recent approach would be dramatically reversed by cutting production. The business last reduced oil output in May 2020, at a period of sharply falling demand brought on by the early stages of the coronavirus pandemic.
It has gradually increased production ever since. The group then changed course and removed 100,000 barrels from the market last month. That’s a tenth of what experts think OPEC+ may reveal on Wednesday.
The action could be interpreted as a criticism to President Biden, who visited Saudi Arabia during the summer to request a boost in output. Despite Biden having previously stated that he thought the kingdom was a pariah state. Additionally, he publicly ascribed responsibility to Saudi Crown Prince Mohammed bin Salman for the 2018 murder of Saudi journalist Jamal Khashoggi at the Saudi Consulate in Istanbul.
