Ana sayfa » OPEC+ agrees on deep oil production cuts

OPEC+ agrees on deep oil production cuts

Oil hovers near three-week highs after OPEC+ agrees to cut crude output

by BUNKERIST

Concerns over tight oil supplies and rising inflation intensified after the OPEC+ group of nations announced the largest supply cut since 2020 ahead of the European Union’s embargo on Russian energy.

Oil prices stabilized near three-week highs on Thursday after OPEC+ agreed to further tighten global crude supplies in an agreement to cut production by around 2 million barrels per day.

Global crude futures bounced back to three-week highs this week after the Organization of the Petroleum Exporting Countries and their allies, including Russia, agreed to cut production by 2 million bpd just ahead of the peak winter season.

Brent crude futures for the December settlement rose 4 cents to $93.41 a barrel as of 0538 GMT, after gaining 1.7% in the previous session.

West Texas Intermediate (WTI) November crude futures rose 1.4 percent to $87.78 a barrel, up 2 cents on Tuesday.

The agreement between the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, avoids the European Union’s embargo on Russian oil and increases the risk of inflation by squeezing supply in an already tight market.

Given that production in some OPEC+ countries is below target levels, the actual cut will be smaller than the 2-million-barrel cut agreed at the meeting.

Saudi Energy Minister Abdulaziz bin Salman said the actual supply cut would be around 1 million to 1.1 million bpd, in response to rising interest rates in the West and a weakening global economy.

US President Joe Biden’s administration criticized the deal as “narrow-minded”. The White House said it would continue to evaluate whether to release more strategic oil reserves (SPRs) to drive prices down.

The White House said it would consult with Congress on additional ways to reduce OPEC and its allies’ control over energy prices, with clear reference to legislation that could expose group members to antitrust lawsuits.

More than half of the 1 million bpd supply cut is expected to come from Saudi Arabia, the world’s largest exporter, according to analysts at RBC Capital.

Separately Wednesday, Russian Deputy Prime Minister Alexander Novak said Russia could cut oil production in an effort to offset the effects of price caps on the West’s actions in Moscow.

Last week’s decline in US crude oil and fuel inventories also supported prices. The Energy Information Administration (EIA) said crude inventories fell by 1.4 million barrels to 429.2 million barrels in the week ended Sept.

OPEC’s decision widened the diplomatic rift between the Saudi-backed bloc and Western nations, which feared that high energy prices would hurt the fragile global economy and hinder efforts to deprive Moscow of oil revenue after Russia’s invasion of Ukraine.

The gas crisis began to worsen after Europe depleted its winter stocks. The OPEC decision will further increase spot prices, especially for Middle Eastern oil, which supplies nearly two-thirds of Asian demand. Inflation concerns will rise as governments from Japan to India grapple with rising costs of living and Europe, which will burn more oil this winter to replace Russian gas, is expected to rise in oil prices.