Oct 06, 2022 05:21 UTC
  • OPEC+ agrees deep cuts to oil production despite US pressure

OPEC+ agreed its deepest cuts to oil production since the 2020 COVID pandemic at a Vienna meeting on Wednesday, curbing supply in an already tight market despite pressure from the United States and others to pump more.

The cut could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar.

The United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals don't support them, a source familiar with the matter said.

“Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of U.S. mid-term elections,” Citi analysts said in a note.

“There could be further political reactions from the US, including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill,” Citi said, referring to a US antitrust bill against OPEC.

JPMorgan also said it expected Washington to put in place counter measures by releasing more oil stocks.

OPEC+ sources said the agreed production cuts of 2 million bpd or 2% of global demand would be made from existing baseline figures.

That means the cuts would be less deep because OPEC+ fell about 3.6 million barrels per day short of its output target in August.

SS