FRANKFURT, Germany (AP) — OPEC and allied oil-producing nations, including Russia, have cut supplies to the global economy slightly Monday, underscoring their displeasure as recession fears help drive down crude prices – as well as the cost of gasolineto the delight of drivers.
The October decision reverses a mostly symbolic increase of 100,000 barrels per day in September. This follows a statement last month by Saudi Arabia’s energy minister that the OPEC+ coalition could cut output at any time.
Oil producers like Saudi Arabia have resisted US President Joe Biden’s calls to pump more oil to lower gasoline prices and burden consumers. OPEC+ has only maintained cautious increases to compensate for the severe cuts made during the COVID-19 pandemicwhich were finally restored in August.
Since then, mounting worries about collapsing future demand have helped push oil prices down from June highs of over $120 a barrel, reducing the windfall for the coffers of OPEC+ countries, but proving to be a blessing for drivers in the United States, as prices at the pumps have fallen.
The supply cut for October is just a small fraction of the 43.8 million barrels per day under OPEC+ production targets, but bucked several analysts’ forecasts that output would not change. not. Oil prices jumped after the announcement.
U.S. 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 negligible, but the message from today’s cut is clear: OPEC+ thinks it’s down enough,” the University of Washington energy policy expert tweeted. Columbia, Jason Bordoff.
Oil prices have swirled in recent months: fears of recession pushed them down, while fears of a loss of Russian oil due to sanctions linked to its invasion of Ukraine pushed them up.
Recently, recession fears have taken over. European economists expect a recession at the end of this year due to soaring inflation fueled by energy costswhile the severe restrictions imposed by China aimed at stopping the spread of the coronavirus have undermined the growth of this great world economy.
Falling oil prices have been a boon for U.S. driverspushing gasoline prices down to $3.82 a gallon from record highs of over $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 must meet demand to support economic growth and lower prices for American consumers and consumers around the world,” said Karine Jean-Pierre, attaché White House press release. “President Biden is committed to continuing to take all necessary steps to strengthen energy supply and drive down energy prices.”
In June, fears that US and EU sanctions would pull Russian oil off the market helped push Brent above $123. Prices have fallen sharply in recent weeks as it has become clear that Russia is still managing to sell significant amounts of oil to Asiaalbeit at heavily discounted prices.
But concerns over the loss of Russian supplies are still present as European sanctions aimed at blocking most Russian oil imports will not come into effect until the end of the year.
Other factors are on the prowl that could influence the price of oil. On the one hand, the rich democracies of the Group of Seven plan to impose a price cap on Russian oil aimed at tackling high energy prices and cutting oil profits that Russia can use for its war in Ukraine.
That’s if the plug works as expected. Russia could refuse to supply oil to countries and companies meeting the cap, which would take barrels off the market. The ceiling price has not been fixed and its influence on the world price remains uncertain.
Meanwhile, an agreement between Western countries and Iran to limit Tehran’s nuclear program could ease sanctions and see more than a million barrels a day of Iranian oil return to the market in the coming months. However, tensions between the United States and Iran seem to have increased in recent days: Iran seized two American naval drones in the Red Sea, and American, Kuwaiti and Saudi warplanes 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 per day was only for that month and the group could meet again at any time to discuss developments in the market.
Associated Press writer Will Weissert in Milwaukee contributed.