OPEC+ agreed to cut oil production by two million barrels per day
(ORDO NEWS) — OPEC+ members have agreed to cut oil production by two million barrels per day, Al Arabiya reports. Analysts note that this will help balance the price of black gold. However, the US is unhappy, as this could interfere with the Biden administration in the upcoming midterm elections.
On Wednesday, following a meeting, members of OPEC + agreed to cut oil production by two million barrels per day in November.
According to the group, the “Declaration of Cooperation” will be extended until the end of 2023, with ministerial meetings held every six months.
The OPEC+ Ministerial Monitoring Committee will meet every two months to monitor market developments.
According to the agreement, the quota of Saudi Arabia for oil production in November decreased to 10.48 million barrels per day.
According to OPEC+ sources, countries have agreed to cut oil production by two million barrels per day, despite pressure from the United States and other consumer countries to increase oil production.
The sources also said the organization’s agreed-upon reduction is scheduled to take effect in November. The next OPEC+ meeting will be held in December.
Cuts in oil production could lead to a recovery in oil prices, which fell to about $90 (from $120) three months ago due to fears of a global economic downturn, higher interest rates in the United States and a stronger dollar.
It is still unclear, the sources said, whether the deal could include additional voluntary oil cuts by members of the organization or its current production shortfall.
OPEC production is currently three million bpd below its target, and accounting for this difference will dampen the impact of new cuts.
In an initial response, White House National Security Council (NSC) Strategic Communications Coordinator John Kirby said: “We need to be less dependent on OPEC+ oil and other oil producers.”
“If oil prices rise due to large production cuts, this is likely to irritate the Biden administration ahead of the US midterm elections,” analysts at Citi said.
“Further political reactions from the United States are possible, including additional sales of strategic stocks,” they added.
The price of Brent crude oil – the global price benchmark for black gold – rose 3% on Tuesday to top $91 a barrel, rising even higher after reports of production cuts.
CMarkits London CEO Yousef al-Shammari said: “The real cut will be between 1 and 1.1 million bpd, with Saudi Arabia, the UAE and Kuwait contributing around 800,000 bpd.”
As al-Shammari noted in an interview with Al-Arabiya, the three Gulf countries can be expected to receive the largest amount of cuts, as they have proven their absolute commitment to the agreement in previous months.
In his opinion, in case of any economic changes, other steps will follow in light of the lack of clarity in the global arena. This refers to what is happening today in China and the expectation of a recession in Europe and the United States of America.
Market balance
For his part, Tariq Er-Rifai, head of the Kurum Center for Strategic Studies, said: “Today’s OPEC+ decision is positive and supports efforts to balance supply and demand in the oil market.”
He added in an interview with Al-Arabiya: “The slowdown in economic growth in China and other developed countries indicates a fall in demand for oil, so today’s decision will be reflected in maintaining prices.”
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