9 hours ago
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Some of the world’s largest oil producing countries have decided to reduce the amount of exports in a decision that should raise international oil prices.
OPEC Plus members, including Saudi Arabia and Russia, have said they will cut production by 2 million barrels per day.
The group said it wanted to stabilize prices, which have fallen in recent months due to the slowdown in the global economy.
But the decision has raised fears over rising gasoline prices, which car owners need.
Expectations that countries plan to pump less have already pushed oil prices higher this week. The price of a barrel of Brent crude jumped about 2% to more than $ 93 a barrel on Wednesday.
A spokesperson for RAK Automotive said the production cut announced Wednesday would “inevitably” lead to higher oil prices, resulting in higher wholesale fuel costs.
“The question is when and to what extent retailers choose to pass on these increased costs,” said RAC spokesman Simon Williams.
The cut announced by the Organization of Petroleum Exporting Countries (OPEC) and its allies represents the organization’s largest reduction since the peak of the Corona outbreak in 2020.
It comes despite pleas from the United States and other countries to pump more, after oil prices skyrocketed this spring when the war in Ukraine cut off supplies.
The White House said in a statement that US President Joe Biden was “disappointed with the shortsighted decision.”
The United States has pledged to continue producing oil from national stocks “as appropriate” and to seek other ways to try to curb fuel prices, an important issue for American voters in the mid-term elections scheduled for November.
The move is also likely to disrupt US-led efforts to limit the price of Russian oil, a plan proposed by the US as a way to limit the flow of money into the country and its use for military purposes.
OPEC members defended their decision in response to significant “uncertainty” about future oil demand amid concerns that the global economy is going into recession.
“The decision is technical, not political,” UAE Energy Minister Suhail Al Mazrouei told reporters as OPEC + members met in Vienna to discuss the plans.
Rising oil prices were a major driver of the rise in consumer prices that hit countries around the world earlier this year, pushing inflation rates to levels not seen in decades. and heightening political tensions.
The recent decline has provided some relief for consumers, even as the prices of many other commodities, including food, continue to rise.
A barrel of Brent crude traded at $ 84.06 in late September, down from highs of around $ 130 this spring.
Despite falling oil prices and concerns about the global economy, Carolyn Payne, chief commodity economist at research firm Capital Economics, said this was an unusual time for a supply cut.
“Global oil inventories are at historic lows and so far high prices have failed to dampen demand,” he added.
Analysts said the impact of the cuts would likely be less significant than their size might suggest, as some countries were already producing less than they claimed, with Capital forecasting a 1% drop in global supply as a result. .
Kathleen Brooks, director of Minerva Analysys, said that production cuts are the “worst case scenario people are looking for,” a scenario that would weigh heavily on UK financial markets and raise fears that prices in the economy will continue to rise.
“Change the narrative in terms of peak inflation – we may not be there yet,” he said.
oil policy
Analysis by Samir Hashemi, Middle East business reporter
The recent OPEC Plus decision is not only important for oil markets, but also for geopolitics.
The fact that the Saudi-led conglomerate made this decision just three months after President Joe Biden’s controversial trip to Saudi Arabia to persuade Crown Prince Mohammed bin Salman to pump more barrels to lower prices is a major blow to the White House. .
This move not only risks rising oil prices, but will also damage the West’s efforts to limit the revenues of Russian oil used to support its war in Ukraine.
Many countries will see this as a clear indication that major oil producers, especially Saudi Arabia, stand alongside Russia in the name of preventative oil market management.
The decision appears to have garnered the support of the whole group as OPEC + energy ministers approved the proposal in a 30-minute meeting.
As for the oil markets, even if this is a significant decline, the actual impact on global field supplies will be less as many OPEC + members are already pumping well below their official quotas.
But that may not be enough to calm the oil markets in the coming days.
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