OPEC+ cuts oil production by 2M barrels/day, US calls it shortsighted

OPEC+ or the organization of the petroleum exporting countries has reportedly decided to reduce oil output, curtailing supplies in an already constrained market and setting off one of its largest conflicts with the West. The U.S. government criticized the decision as shortsighted.

Saudi Arabia, the de-facto head of OPEC, stated that the output reduction of 2 million barrels per day (b/d), or 2% of the world's supply, was required in response to increasing rates of interest in the West and a deteriorating global economy.

The kingdom dismissed claims that it was working with OPEC+ member Russia to raise prices and asserted that Western criticism of the organization was frequently fueled by ‘wealth arrogance.’

Meanwhile, President Biden would continue to evaluate whether to release additional strategic oil resources to reduce prices.

Due to the high inflation, Biden's approval ratings are poor ahead of the midterm elections, and he has asked US ally, Saudi Arabia, to assist in lowering prices.

According to US officials, Washington wants reduced oil prices in part to withhold Moscow's oil revenue. This year, Biden visited Riyadh but couldn’t obtain any commitment to energy. The fact that Saudi Arabia has not criticized Moscow's actions in Ukraine has further damaged relations.

Oil prices, which dropped to approximately $90 from $120 three months ago on concerns of a worldwide economic slowdown, rising U.S. interest rates, as well as a stronger dollar, may rise because of the reduction in oil supplies announced in Vienna on Wednesday.

Abdulaziz bin Salman, Saudi's energy minister, claimed that OPEC+ had to act quickly as central banks across the globe proceeded slowly to tackle growing inflation with increased interest rates.

Based on current baseline numbers, Wednesday's output cuts of 2 million b/d would be less drastic because OPEC+ fell approximately 3.6 million b/d short of its production target in August.

According to Prince Abdulaziz, the actual cuts would be 1.0–1.1 million b/d.

On Wednesday, the price of benchmark Brent crude surpassed $93 per barrel.

Source credit: https://japantoday.com/category/business/opec-agrees-deep-oil-production-cuts-biden-calls-it-shortsighted