by Ahmad Ghaddar, Alex Lawler and Rowena Edwards
VIENNA (Reuters) – OPEC and its allies decided on Wednesday to cut oil production by two million barrels a day, the biggest cut since the COVID-19 pandemic, despite pressure from the United States for a increase in supply.
A reduction in pumping could push up oil prices, battered by fears of a global recession, the tightening of monetary policy in the United States and the appreciation of the dollar.
The United States is pressuring OPEC not to go down this path, arguing that economic fundamentals do not allow a reduction in supply, reported a source familiar with the matter.
It is not yet clear whether this drop in production could include additional voluntary reductions from producing countries such as Saudi Arabia, the sources added.
The futures price of a barrel of Brent gained 0.59% around 2:00 p.m. GMT to 92.34 dollars after these announcements. It had fallen below $84 on September 26, its lowest level since mid-January.
“Higher crude prices, if driven by significant production cuts, would likely irritate the Biden administration ahead of the U.S. midterm elections (November 8),” Citi analysts said in a note. .
“There could be other policy reactions from the United States, including further recourse to strategic stocks,” they added.
Washington wants a drop in prices in particular to deprive Moscow of revenue from the sale of oil while Saudi Arabia has refrained from condemning Russia’s actions in Ukraine.
Relations are strained between the Wahhabi kingdom and the administration of the US president, who visited Riyadh in July but failed to obtain firm commitments of cooperation on energy security.
The West accuses Russia of using energy as a weapon, creating a crisis in Europe that could lead to gas and electricity rationing this winter.
Saudi Arabia and other OPEC+ members have said they are looking more to prevent market volatility than to hit a specific price.
“The decision is technical, not political,” assured Emirati Energy Minister Suhail al-Mazroui ahead of the OPEC+ meeting, saying concerns about a global recession were to be one of the main topics addressed.
(French version Laetitia Volga, edited by Kate Entringer and Jean-Stéphane Brosse)
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