The announcement was made by Iran’s Deputy Oil Minister, Amir Hossein Zamaninia, at the end of a conference of the Organization of the Petroleum Exporting Countries (OPEC) and its 10 allied producing countries, including Russia, Mexico and Kazakhstan.
The production cut was already expected and is justified by the sharp drop in oil prices in recent weeks, with the decision expected to prompt a recovery in the amounts paid to OPEC.
The oil price has fallen from about 120 to 90 dollars (from about 121 euros to 91.3) in the past three months because of fears of a global economic recession, but also because of rising interest rates in the United States and the appreciation of the dollar.
The production drop, which will begin in November, is the largest since May 2020, when the Covid-19 pandemic began, and was approved by alliance members just over a month before the United States midterm elections.
US President Joe Biden, who has been battling for months to try to stem price increases that erode household purchasing power — and even went to Riyadh in July to defend his position — has already announced his criticisms to OPEC’s “short -seeing decision”.
President Joe Biden is “disappointed” at the OPEC+ cartel’s decision to cut oil production and believes it will hurt the global economy, the White House said in a statement signed by National Security Adviser Jake Sullivan and top economic adviser Brian. deese.
OPEC says it is “not governed by political issues”
When questioned on his arrival in Vienna for today’s meeting, UAE Energy Minister Souhail ben Mohammed Al-Mazrouei claimed that OPEC+ is a “technical organization” not governed by political issues.
Founded in 1960 with the aim of regulating crude oil production and price by setting quotas, OPEC was expanded to Russia and other partners in 2006 to form OPEC+.
As a historic gesture, alliance members decided in the spring of 2020 to cut production by nearly 10 million barrels per day in order to cope with the collapse in demand caused by the Covid-19 pandemic.
As early as September last year, the group had slightly lowered its target (by 100,000 barrels), claiming it was ready to move forward.
After booming earlier this week, the price of a barrel of Brent from the North Sea stood at US$91.84 this morning, while its US counterpart, WTI, was US$86.36 per barrel.
Oil prices already rose on Wednesday as OPEC and Russia-led allies announced a major production cut, while the stock market lost gas.
Oil prices had bounced back to pre-war levels in Ukraine in recent weeks on concerns about a global economic slowdown, but have risen again in recent days on expectations of production cuts.
The major international oil contract, Brent, rose two percent after the decision.
“Oil futures are expected to remain bullish in the short to medium term, but lingering concerns about a global recession and rising inflation are likely to limit the long-term rally,” said Srijan Katyal, global head of strategy and services. brokerage ADSS.
Swissquote analyst Ipek Ozkardeskaya warned that: the big cut could backfire on OPEC+ if investors fear the decision will raise inflation and force central banks to raise interest rates so much that it will trigger a recession. “The higher energy prices, the more central banks have to kill demand to lower prices.”
US reserves at lowest level since 1984
The supply will hit countries “already suffering” from high prices, while “the global economy faces the continued negative impact” of the Russian attack on Ukraine, the White House said in a statement.
The OPEC+ decision, which came despite frenzied lobbying in Washington, has put Biden and his Democratic party in a deadlock as it fuels fuel price hikes just five weeks before the US midterm elections, in which Republicans hope to seize control of the country.
“Clearly OPEC+ is aligned with Russia with today’s announcement,” said Karine Jean-Pierre, White House press secretary aboard Air Force One.
The White House statement adds that Biden will order a new commodity from the country’s strategic oil reserve, with 10 million barrels to be brought to market next month, in a bid to dampen price increases.
However, those reserves are quickly running out after record looting orders ordered by the government since March last year. Reserves are now at their lowest level since July 1984, and it is unclear when the Biden administration plans to bolster those reserves.
The upcoming releases will continue “where necessary to protect U.S. consumers and promote energy security, and (Biden) directs the Secretary of Energy to explore further responsible actions to continue increasing domestic production in the near term,” he said. in the communique.
In addition, the administration will “consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the White House added.
Along with supply chain delays due to the Covid-19 shutdowns, high fuel prices are responsible for fueling the United States’ highest inflation rate in four decades.
Source: DN
