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The OPEC+ alliance, led by Saudi Arabia and Russia, decided this Wednesday, October 5, in Vienna to reduce its world oil output by two million barrels per day, which represents the largest cut in oil supply since May 2020, in the midst of a pandemic. .
International oil prices woke up this Wednesday lower, but an announcement was enough for them to reverse the trend and point to a close at three-week highs.
The Organization of the Petroleum Exporting Countries (OPEC) and its ten allied producing nations, including Russia, Mexico and Kazakhstan, will cut their daily supply starting in November, Iran’s Deputy Oil Minister Amir Hossein Zamaninia confirmed at the end of a ministerial conference in Vienna, Austria.
OPEC +, as the group and its partners are known, holds about half of the world’s oil supply, so a reduction in supply, in practice, translates into higher prices.
Indeed, oil prices have fallen to around $90 a barrel from $120 just three months ago on fears of a global economic downturn, rising US interest rates and a stronger dollar.
The 45th Meeting of the Joint Ministerial Monitoring Committee and the 33rd OPEC and Non-OPEC Ministerial Meeting took place in person at the OPEC Secretariat in Vienna, Austria, on Wednesday, 5 October 2022.
Read Press Release? https://t.co/Bu3HMDi3In
— OPEC (@OPECSecretariat) October 5, 2022
Higher prices translate to higher fuel costs
The United States was the first country to react negatively to the OPEC+ announcements.
At a time when maintaining the global energy supply is of paramount importance, this decision will have the greatest negative impact on low- and middle-income countries, which are already suffering from high energy prices. from a statement by National Security Adviser Jake Sullivan and his economic adviser Brian Deese.
This country has been pressuring the large oil exporters not to reduce their production in order to keep fuel prices low, which have strongly influenced inflation in recent months.
For the Joe Biden Administration, the current market situation with fewer Russian barrels in circulation does not support a supply cut and does suggest that the scheduled cut is a political decision, rather than a technical one.
But Saudi Arabia and its allies have said they are seeking to avoid volatility rather than target a particular oil price.
The two million barrels a day that the big oil exporters are going to retain represent two percent of world demand, which adds up to about 100 million barrels.
With AP and Reuters
