FRANKFURT, Germany (AP) – OPEC and allied oil-producing nations, including Russia, cut supplies to the global economy on Monday, underscoring their unhappiness as recession fears help lower prices of crude oil, along with the cost of gasoline. for the pleasure of the drivers.
The October decision rolls back a largely symbolic increase of 100,000 barrels a day in September. It follows a statement last month by Saudi Arabia’s energy minister that the OPEC+ coalition could cut output at any time.
Oil producers such as Saudi Arabia have resisted calls from US President Joe Biden to pump more oil to reduce gas prices and the burden on consumers. OPEC+ has remained with only cautious increases to offset the deep cuts made during the COVID-19 pandemic, which were finally restored in August.
Since then, growing concerns about falling future demand have helped lower oil prices from June peaks of more than $120 a barrel, reducing the windfall for OPEC countries’ coffers + but proving a boon for US drivers as prices at the pump have been reduced.
The supply cut for October is just a small fraction of the 43.8 million barrels per day OPEC+ production targets, but missed several analysts’ predictions of no change in output. Oil prices rose after the announcement.
US crude rose 3.3% to $89.79 a barrel, while international benchmark Brent rose 3.7% to $96.50 after the decision.
The amount of oil per day “may seem insignificant, but the message from today’s cut is clear: OPEC+ believes they have cut enough,” Columbia University energy policy expert Jason Bordoff tweeted .
Oil prices have rallied in recent months: fears of a recession have pushed them lower, while worries about a loss of Russian oil due to sanctions over its invasion of Ukraine have pushed them higher.
Recently, recession fears have taken the upper hand. Economists in Europe are pointing to a recession later this year due to rising inflation fueled by energy costs, while China’s severe restrictions aimed at stopping the spread of the coronavirus have undermined the growth of this important world economy.
Falling oil prices have been a boon to American drivers, pushing gas prices down to $3.82 a gallon from record highs of more than $5 in June and offering a potential boost to Biden as his Democratic Party heads into the midterm elections.
“The president has been clear that energy supply should meet demand to support economic growth and lower prices for American consumers and consumers around the world,” said the press secretary of the White House, Karine Jean-Pierre. “President Biden is committed to continuing to take all necessary steps to strengthen energy supplies and lower energy prices.”
In June, fears that US and European sanctions would drive Russian oil off the market helped push Brent above $123. Prices have fallen sharply in recent weeks as it became clear that Russia is still managing to sell significant amounts of oil to Asia, albeit at deeply discounted prices.
But concerns about the loss of Russian supply remain because European sanctions aimed at blocking most Russian oil imports do not come into force until the end of the year.
There are other factors that can influence the price of oil. On the one hand, the Group of Seven rich democracies plans to impose a price cap on Russian oil in order to combat high energy prices and reduce oil profits that Russia can use for its war in Ukraine .
That is if the cap works as intended. Russia could refuse to supply oil to countries and companies that observe the limit, which would take barrels off the market. The price cap has not been set and its influence on the overall price is still unclear.
Meanwhile, a deal between Western countries and Iran to limit Tehran’s nuclear program could ease sanctions and see more than 1 million barrels per day of Iranian oil back on the market in the coming months. However, tensions between the U.S. and Iran appear to have risen in recent days: Iran seized two U.S. naval drones in the Red Sea, and U.S. warplanes, Kuwaiti and Saudi Arabia flew over the Middle East on Sunday in a show of force.
Energy ministers from OPEC+ countries said their September increase of 100,000 barrels a day was for this month only and that the group could meet again at any time to address market developments.
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Associated Press writer Will Weissert in Milwaukee contributed.