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OPEC+ agrees deep oil production cuts, Biden calls it shortsighted

Commodities Oct 05, 2022 04:37PM ET
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By Ahmad Ghaddar, Alex Lawler and Rowena Edwards

VIENNA/LONDON (Reuters) - OPEC+ agreed steep oil production cuts on Wednesday, curbing supply in an already tight market, causing one of its biggest clashes with the West as the U.S. administration called the surprise decision shortsighted.

OPEC's de-facto leader Saudi Arabia said the cut of 2 million barrels per day (bpd) of output - equal to 2% of global supply - was necessary to respond to rising interest rates in the West and a weaker global economy.

The kingdom rebuffed criticism it was colluding with Russia, which is included in the OPEC+ group, to drive prices higher and said the West was often driven by "wealth arrogance" when criticising the group.

The White House said President Joe Biden would continue to assess whether to release further strategic oil stocks to lower prices.

"The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine," the White House said.

Biden faces low approval ratings ahead of mid-term elections due to soaring inflation and has called on Saudi Arabia, a long-term U.S. ally, to help lower prices.

U.S. officials have said part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue. Biden travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy. Relations have been further strained as Saudi Arabia has not condemned Moscow's actions in Ukraine.

The cut in oil supplies decided in Vienna on Wednesday could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

Saudi Energy Minister Abdulaziz bin Salman said OPEC+ had needed to be pro-active as central banks around the world moved to "belatedly" tackle soaring inflation with higher interest rates.

LOWER REAL CUTS

Wednesday's production cuts of 2 million bpd are based on existing baseline figures, which means the cuts would be less deep because OPEC+ fell about 3.6 million barrels per day short of its output target in August.

Under-production happened because of Western sanctions on countries such as Russia, Venezuela and Iran and output problems with producers such as Nigeria and Angola.

Prince Abdulaziz said the real cuts would be 1.0-1.1 million bpd.

Analysts from Jefferies said they estimated the figure at 0.9 million bpd, while Goldman Sachs (NYSE:GS) put it at 0.4-0.6 million bpd saying cuts would mainly come from Gulf OPEC producers such as Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

Benchmark Brent crude rose above $93 per barrel on Wednesday.

The West has accused Russia of weaponising energy, with soaring gas prices and a scramble to find alternatives creating a crisis in Europe that could trigger gas and power rationing this winter.

Moscow, meanwhile, accuses the West of weaponising the dollar and financial systems such as the international payments mechanism SWIFT in retaliation for Russia sending troops into Ukraine in February.

Russian Deputy Prime Minister Alexander Novak, who was put on the U.S. special designated nationals sanctions list last week, also travelled to Vienna to participate in meetings.

Novak is not under EU sanctions. He and other members of OPEC+ agreed to extend the cooperation deal with OPEC by another year to the end of 2023.

The next OPEC+ meeting will take place on Dec 4. OPEC+ will move to meeting every six months instead of monthly meetings.

OPEC+ agrees deep oil production cuts, Biden calls it shortsighted
 

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Comments (28)
Nils Hullmann
Nils Hullmann Oct 06, 2022 1:29AM ET
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oil 120$ during midterms...I would ***** myself lol
Maximus Maximus
Maximus Maximus Oct 06, 2022 12:28AM ET
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normally didn't mind OPEC, but now they're shooting themselves in the foot
Michael Ong
Michael Ong Oct 05, 2022 7:16PM ET
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Who is short-sighted, releasing half of Strategic oil reserves to save his own party's Nov election?
Nils Hullmann
Nils Hullmann Oct 05, 2022 7:16PM ET
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but but but votes.....you have more student loan forgiveness for me ?
Nils Hullmann
Nils Hullmann Oct 05, 2022 4:18PM ET
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big middle finger to EU and midterm grandpa.....I love it !
Chad Richer Than You
Chad Richer Than You Oct 05, 2022 2:36PM ET
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Just assass.inate Abdulaziz Al Saud! We indirectly assass.inate Faisal before for oil-related reasons 💀💀
Yama Fazel
Yama Fazel Oct 05, 2022 2:33PM ET
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The saudi arab is the second russia who also wants to bring the europian countries more deeper into energy crisis. The westen countries should be making theirself independent from russian gas and soudi's oil
Doug Komhyr
Doug Komhyr Oct 05, 2022 2:33PM ET
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Trump did just that. What happened. I'll tell you, Let's Go Brandon!
First Last
First Last Oct 05, 2022 2:33PM ET
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Doug Komhyr   The US is still energy independent.
First Last
First Last Oct 05, 2022 2:33PM ET
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The US should call Maduro a Na zi, claim Americans there are oppressed, invade Venezuela, bring democracy back, and then the US can invest in its oil sector to supply US & allies.  And the Venezuelans will be free & rich as again, as they were before Maduro & Chavez.
Nils Hullmann
Nils Hullmann Oct 05, 2022 2:33PM ET
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yeah with sun and wind.....you ppl haven't realized that the power is commodities not made up money and promised
First Last
First Last Oct 05, 2022 2:33PM ET
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Nils Hullmann  Export > import:  "In 2021, the United States imported about 8.47 million barrels per day (b/d) of petroleum ...  In 2021, the United States exported about 8.54 million b/d of petroleum"  --  www.eia.gov/tools/faqs/faq.php?id=727
EL LA
EL LA Oct 05, 2022 2:01PM ET
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If the price keeps falling they should cut more.
john andre
john andre Oct 05, 2022 1:38PM ET
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lam happy to see that the UAE doesn't give two sh--ts about this fool of a president. 2024 can't be close enough to get rid of him
Forex Harbingers
ForexHarbingers Oct 05, 2022 12:29PM ET
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Playing Biden for the absolute tool he is. lol
Don Getty
Don Getty Oct 05, 2022 12:29PM ET
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all this is going to do is hasten the rush to EV and the demise of oil dependence - GOP is screwed
Cody Hawkins
Cody Hawkins Oct 05, 2022 12:07PM ET
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OPEC doesn't care what the US has to say. They don't respect us and I can't say I blame them.
Barani Krishnan
Barani Krishnan Oct 05, 2022 12:07PM ET
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Well, we shouldn't "respect" them either. Respect is earned. Fear is forced through bullying, and that's exactly what they -- and Putin -- are doing, holding the world at ransom by weaponizing energy supplies.
Trevor Roberts
LimitUp Oct 05, 2022 12:07PM ET
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F OPEC
Barani Krishnan
Barani Krishnan Oct 05, 2022 12:07PM ET
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Trevor Roberts  Thank you.
 
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