Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

OPEC+ Tries to Keep Oil Above $90 With Large Production Cut

Commodities Oct 05, 2022 12:09PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Bloomberg. Visitors arrive at the OPEC Secretariat building ahead of the 33rd meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries in Vienna, Austria, on Wednesday, Oct. 5, 2022. OPEC+ is considering its biggest production cut since 2020 as it tries to stabilize oil prices, a move that risks cranking up tensions with Washington.
 
LCO
+1.24%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

(Bloomberg) -- Sign up for our Middle East newsletter and follow us @middleeast for news on the region.

OPEC+ agreed to cut its collective output limit by 2 million barrels a day, stoking tensions with the US as the cartel seeks to halt a slide in oil prices caused by the weakening global economy.

It’s the biggest reduction by the Organization of Petroleum Exporting Countries and its allies since 2020, but will only result in a supply reduction about half the size of the headline number. Several member countries are already pumping well below their quotas, meaning they would already be in compliance with their new limits without having to reduce production. 

Even so, the decision risks adding another shock to a world that is already battling inflation driven by high energy costs. US President Joe Biden was “disappointed by the shortsighted decision” that will hurt the global economy, the White House said in a statement. 

In addition to the cuts that will take effect from November, OPEC+ extended its cooperation agreement until the end of 2023. The supply curbs will remain in place until the end of next year, unless the market changes, said Saudi Energy Minister Prince Abdulaziz Bin Salman. 

“OPEC wants prices around $90,” Nigerian Minister of State for Petroleum Resources Timipre Sylva said after the meeting. “It would destabilize some economies” if crude fell below that level, he said.

Oil rose as much as 2.4% to $93.96 a barrel in London, the highest in three weeks. 

 

Earlier on Wednesday, US officials were making calls to counterparts in the Gulf trying to push back against the move to cut production, according to people familiar with the situation. President Biden has long been pushing OPEC+ to boost output, visiting Saudi Arabia earlier this year in search of lower pump prices for Americans ahead of midterm elections in November.

The White House’s national security adviser, Jake Sullivan, and National Economic Council Director Brian Deese said in a statement after the OPEC+ meeting that the US would release another 10 million barrels of oil from the Strategic Petroleum Reserve in November, and that “the president will continue to direct SPR releases as appropriate to protect American consumers and promote energy security.”

Real Cuts

The cut of 2 million barrels a day will be measured against the same baseline as the previous OPEC+ agreements, Amir Hossein Zamaninia, OPEC governor for Iran, told reporters in Vienna after the meeting. Shared pro rata between members, that would require just eight countries to curb actual production and deliver a real reduction of about 900,000 barrels a day, according to Bloomberg calculations based on September output figures.

OPEC+ will no longer hold monthly meetings, Zamaninia said. The group’s Joint Ministerial Monitoring Committee, which oversees implementation of production cuts, will meet every two months, he said. 

The supply curbs may not have the result OPEC+ is hoping for, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

“Cutting production at this time has been a bit of mystery to me given the fact the price has not fallen much below the $90-100 Brent range that seems to be acceptable to most producers,” Hansen said. “This decision risks agitating the US while potentially leading the FOMC to keep tightening for longer as inflation will become more sticky. The result being a stronger dollar, higher bond yields and a global economic slowdown that may end up taking longer to reverse.”

(Updates with comment from Saudi energy minister in fourth paragraph.)

©2022 Bloomberg L.P.

OPEC+ Tries to Keep Oil Above $90 With Large Production Cut
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Wout JN
WoutJ Oct 05, 2022 12:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
prove biden and dems are weak this cut would not have happened under Trump administration.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email