OPEC+ Announces Its Cutting Oil Production by 2 Million Barrels a Day Despite US Pressure

OPEC and its allies on Wednesday announced they will slash oil production by 2 million barrels per day, CNN reports.

The group, which includes Saudi Arabia and Russia, announced the largest cut in oil production since the pandemic. The move threatens to raise gas prices just weeks ahead of the midterm election.

The reduction is about 2% of global oil demand.

The price of Brent crude oil rose by 1.5% to more than $93 per barrel and US oil rose 1.7% to $88.

The production cuts are set to begin in November.

The move is believed to be an attempt to preempt a drop in demand due to an economic slowdown in the US, Europe and China.

Biden pressure:

The move came despite pressure from the Biden administration to avoid cutting production.

“I need to see what the detail is. I am concerned, it is unnecessary,” President Joe Biden told reporters on Wednesday.

“At a time when maintaining global supply of energy is of paramount importance, this development will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices,” the administration said in a statement.

OPEC in a statement said that the decision was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.”

Political impact:

Gas prices have been strongly correlated with Biden’s approval rating and analysts believe a price hike ahead of the midterms could hurt Democrats in the elections.

Some analysts say Biden could counter the move by releasing more oil from the US strategist reserve.

"We had always expected supply growth to slow later this year and into 2023, but this latest OPEC+ action has re-enforced our view that prices will end the year a little higher," said Caroline Bain, chief commodities analyst for Capital Economics, according to NBC News.

 

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