The OPEC logo on a sign at the group’s headquarters in Vienna, Austria.
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A group of some of the world’s most powerful oil producers agreed Monday on a small production cut from next month, surprising energy markets at a time of significant turmoil.
OPEC and non-OPEC partner, an influential energy alliance called OPEC+, decided to cut production targets by about 100,000 barrels per day starting in October.
Energy analysts had generally expected the group to stay on course with its production policy.
Last month, OPEC+ agreed to increase oil production by just 100,000 barrels per day. The tiny boost was widely interpreted as a rebuff to US President Joe Biden after his visit to Saudi Arabia to urge the OPEC kingpin to pump more to cool prices and help the global economy.
“The President has taken action — including the historic release of oil from US and global strategic reserves and working with allies on a price cap on Russian oil — to ensure we maintain a global oil supply even as we blame Putin for his actions punish,” he told White House Press Secretary Karine Jean-Pierre.
OPEC+ said in a statement that Monday’s decision to return to August production levels was due to the upward adjustment being “intended for the month of September only.”
The next OPEC+ meeting is scheduled for October 5th.
Oil prices traded significantly higher but remained below daily highs as of Monday afternoon. International benchmark Brent crude futures were up 2.5% to $95.54 a barrel around 1:00 p.m. ET, while US West Texas Intermediate futures were up 2.6% to $89.16 a barrel .
Oil prices have fallen around 25% since early June after hitting multi-year highs in March. The decline was fueled by growing concerns that rate hikes and Covid-related restrictions in parts of China could slow global economic growth and curb oil demand.
Monday’s OPEC+ announcement comes amid a bitter and escalating energy dispute between Russia and the West, with many in Europe deeply concerned about the prospect of a recession and winter gas shortages.
Meanwhile, market participants are closely watching the prospect of a supply boost from Iranian crude if Tehran can complete a renewed version of the 2015 nuclear deal.
G-7 supports price cap for Russian oil
European gas prices rose more than 25% on Monday after Russia’s state energy giant Gazprom announced it would not reopen its main gas pipeline to Europe.
Gazprom said the indefinite shutdown was due to an oil leak in a turbine. The Nord Stream 1 pipeline, which connects Russia to Germany via the Baltic Sea, was due to reopen on Saturday after three days of maintenance.
The Kremlin’s halt to European gas supplies followed a joint statement by the Group of Seven economic powerhouses backing a plan to introduce a price cap mechanism on Russian oil exports.
The OPEC+ announcement comes amid a bitter energy dispute between Russia and the West.
Asad Niazi | AFP | Getty Images
The G-7 initiative aims to weaken Russian President Vladimir Putin’s ability to finance the war in Ukraine. Russia has announced it will stop selling oil to countries that impose price caps on Russian energy exports.
EU politicians have accused the Kremlin of arming energy supplies to sow insecurity in the 27-nation bloc and inflate energy prices amid the Kremlin’s attack on Ukraine.
Moscow denies any responsibility for the shutdown of Nord Stream 1.