The OPEC+ alliance, made up of 23 members, agreed on Wednesday to a major cut in oil production at a meeting in Vienna.
The organization is made up of OPEC’s 13 major oil producers, as well as 10 other non-OPEC countries, including Russia.
What did OPEC+ agree to?
Iranian OPEC Governor Amir Hossein Zamaninia said the group had agreed to cut production by 2 million barrels a day from November. The cut will likely lead to higher oil prices.
The organization said in a statement that the decision was based on “uncertainty surrounding the outlook for the global economy and the oil market.”
Saudi Energy Minister Abdulaziz bin Salman said the organization was a “restoring force” and aimed “to bring stability”. He added that OPEC+ intends to stay “ahead of the curve” in the face of a “period of diverse uncertainties.”
The alliance said it would renew cooperation between OPEC members and non-members, which was due to expire at the end of the year.
Crude oil prices had fallen in recent months on concerns about falling demand and the possibility of a global recession.
A rise in the price of crude oil could help Moscow, which faces an EU ban on most of its crude exports due to come into force in December and a G7 offer to cap Russian oil prices.
In July, US President Joe Biden called on Saudi Arabia to increase oil production. Later, OPEC+ agreed to increase production.
The biggest cut since the height of COVID-19
The alliance cut production by nearly 10 million barrels per day in April 2020 to prevent a major drop in crude prices amid the COVID-19 shutdowns.
Today’s decision marks the largest production cut since the 2020 cut.
OPEC+ began increasing production last year following improvements in the market, and output has returned to pre-pandemic levels.
Some members of the organization, including Russia, have already struggled to meet quotas set by the group, which could limit the impact of the OPEC+ deal to cut production.
The United States denounces a “short-sighted” decision
The White House said US President Joe Biden was “disappointed” with the alliance’s “short-sighted” decision to cut production.
“The President is disappointed with OPEC+’s short-sighted decision,” National Security Advisor Jake Sullivan and Senior Economic Advisor Brian Deese said in a statement.
The decision will affect countries that are “already reeling” from high prices, the statement said. He added that “the global economy faces the continuing negative impact” of Moscow’s invasion of Ukraine.
Biden will continue to direct releases from Washington’s Strategic Petroleum Reserve as needed. He also called on Congress to find ways to increase US energy production and reduce OPEC’s control over world prices, the White House said.
sdi/sms (AFP, AP, Reuters)