Oil: OPEC+ cuts production quotas, Biden “disappointed”
OPEC+, back in Vienna on Wednesday for the first time since March 2020, decided to drastically cut oil production quotas to prop up prices, immediately drawing the wrath of the White House.
US President Joe Biden, who has been trying to stem rising energy costs for months, said he was “disappointed by this short-sighted decision.”
He announced an upcoming congressional consultation “on additional tools and mechanisms to reduce antitrust control over energy prices”.
The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia and its ten partners led by Russia have agreed on a cut of “two million barrels a day” for the month of November, according to a press release from the alliance.
– “Proactive” –
“This is the largest reduction since the pandemic began,” Srijan Katyal of brokerage firm ADSS said in a statement.
It’s likely to boost prices “if consumers breathe a sigh of relief” as prices at the pump have fallen sharply since this summer, stresses Oanda’s Craig Erlam.
The two global crude oil benchmarks have lost ground in recent weeks, hovering around $90 a barrel, a far cry from the highs recorded in March at the start of the war in Ukraine (nearly $140).
Prices, which were initially unresponsive, rose more than 1% around 16:00 GMT to $93.30 a barrel of North Sea Brent and $87.71 a barrel of WTI, its American equivalent.
Faced with criticism at a press conference about the impact on consumers, Saudi Energy Minister Abdel Aziz bin Salman brought up “the various uncertainties” hanging over the global economy. On several occasions he has insisted on the need to be “proactive” in order to “stabilize the market”.
According to Seb’s Bjarne Schieldrop, OPEC+, which made a symbolic cut back in September, “wants to avoid a possible build-up of inventories and consequent low oil prices.”
– A blessing for Moscow –
This decision suits Moscow, which can fill its coffers while a European embargo on Russian oil imports is due to come into force in early December.
“It could therefore be perceived as a further escalation of geopolitical tensions,” comments Ipek Ozkardeskaya, an analyst at Swissquote.
Russian Deputy Prime Minister Alexander Novak, responsible for energy, also attacked the policy of European sanctions on Wednesday.
He on Wednesday condemned any price cap on Russian oil, a measure planned by the EU that would “violate the mechanisms of the market” and could have “very damaging effects” on world industry.
Referring to possible “bottlenecks,” he again warned that Russian companies “would not supply oil to countries that use this tool,” Russian television said.
Established in 1960 with the aim of regulating the production and price of crude oil by setting quotas, OPEC expanded to include Russia and other partners in 2006 to become OPEC+.
In a historic gesture, the members of the alliance decided in spring 2020 to cut almost 10 million euros in view of the collapse in demand in connection with the Covid 19 pandemic. A recipe that worked.
A statement was then signed that OPEC+ decided on Wednesday to extend “until the end of 2023,” a sign of the Saudi prince’s vaunted “cohesion” of the alliance, which has not been shaken by the war in Ukraine.
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