By DAVID McHUGH | Associated Press
FRANKFURT, Germany — The OPEC+ alliance of oil-exporting countries decided on Wednesday to cut production sharply to support falling oil prices, a move that could deal another blow to the struggling global economy and raise politically sensitive pump prices for US drivers. can increase just before important national elections.
Energy ministers have cut production by more than 2 million barrels per day from November after they gathered for their first face-to-face meeting at the OPEC oil cartel headquarters in Vienna since the start of the COVID-19 pandemic. .
The group said the decision was based on the “uncertainty surrounding the outlook for the global economy and the oil market”. Saudi Energy Minister Abdulaziz bin Salman emphasized the group’s stated role as a guardian of stable energy markets.
“We are here to remain as a moderating force, to bring stability,” he told reporters.
Oil is trading well below its summer peaks amid fears that major global economies such as the US or Europe will sink into recession due to high inflation, rising interest rates and energy uncertainty over Russia’s war in Ukraine. The OPEC+ decision could help member Russia weather a looming European ban on most of Moscow’s oil, but its impact will have some limitations as countries in the alliance already fail to meet their quotas.
US President Joe Biden said OPEC+’s decision was “short-sighted as the global economy faces the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine,” White House press secretary Karine Jean-Pierre said. , to reporters aboard Air Force One.
“Clearly OPEC+ is joining Russia with today’s announcement,” she said.
Bin Salman dismissed questions referring to the response in Washington or suggesting OPEC was assisting Russia, saying the discussion was in a non-political “silo” where the focus was on prudent management of oil markets.
After a symbolic trim last month, Wednesday’s decision marks an abrupt reversal of months of recovery from deep austerity measures made during the depths of the pandemic. As demand recovered, global energy prices have soared since Russia invaded Ukraine, fueling inflation that is putting pressure on economies worldwide.
Some of the OPEC+ cut is “on paper” because members can’t already supply enough oil to reach their assigned areas, said Gary Peach, an oil market analyst at energy information firm Energy Intelligence. “Only half of those are real barrels,” he said.
A cut with oil near $90, which is “a comfortable price for all producers,” may not bode well with customers, but oil ministers are “looking into the tunnel of recession” that could boost demand in the coming months. reduce, Peach said. “They decided to anticipate that.”
The recent drop in oil prices has been a boon for US drivers, who saw lower gas prices at the pump before costs started rising recently, and for Biden as his Democratic Party gears up for next month’s congressional elections.
Biden has sought credit for gasoline prices falling from their average peak of $5.02 in June — with government officials highlighting the late March announcement that one million barrels a day would be released from the strategic reserve for six months. High inflation is a fundamental impediment to Biden’s approval and has dampened Democrats’ chances in the midterm elections.
Oil supply could be further cut in the coming months when a European ban on most Russian imports comes into effect in December. A separate move by the US and other members of the Group of Seven Rich Democracies to impose a price cap on Russian oil could cut supply if Russia retaliates by refusing to ship to countries and companies that are at the cap. to keep.
The EU agreed on new sanctions on Wednesday that are expected to include a price cap on Russian oil, intended to starve Putin’s country of money for his war machine. It comes amid an energy crisis sparked by Russia’s cut in natural gas supplies to Europe, whose leaders are accusing Moscow of retaliation for supporting Ukraine and imposing sanctions.
Russia “will need to find new buyers for its oil when the EU embargo comes into effect in early December and will likely have to make further price concessions to do so,” Commerzbank analysts said. “Higher upfront prices – boosted by production cuts elsewhere – would therefore undoubtedly be very welcome.”
International benchmark Brent has fallen to $84 in recent days after spending more than $100 a barrel for most of the summer months. US crude rose to $87.64 and the international benchmark Brent rose to $93.21 after the decision.
Associated Press reporters Chris Megerian and Josh Boak in Washington contributed.