OPEC+, the Organization of the Petroleum Exporting Countries associated with ten other producing countries, met this Wednesday in Vienna. A first since March 2020. The representatives of the countries have marked the coup: OPEC+ has decided on a drastic cut in oil production quotas. The decision will support prices, at the risk of offending the White House and Western countries.
The thirteen members of OPEC, led by Saudi Arabia, and their ten partners led by Russia, have agreed to a cut of “two million” barrels per day for the month of November, the alliance announced in a press release.
Just when consumers breathed a sigh of relief
“This is the largest reduction since the start of the pandemic“, reacted in a note Srijan Katyal, of the brokerage firm ADSS. She will probably “boost prices“, he added, against Western efforts to stem the rise in energy costs weighing on global growth.
This decision comesjust as consumers breathed a sigh of relief“, prices at the pump having fallen sharply since this summer, recalls Craig Erlam, of Oanda, another brokerage company.
The two global crude 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).
The White House on the lookout
Such an announcement”won’t be welcomed by the White House ahead of next month’s midterm elections“, had warned before the meeting Tamas Varga, at PV Energy.
Joe Biden has been struggling for months trying to stem the surge in prices that is undermining household purchasing power. The American president even went to Riyadh in July during a very controversial visit.
At the White House, we tried to put this meeting into perspective on Wednesday, a senior official stressing that OPEC+ is meeting “every month with clock precision“.
The day before, spokesperson Karine Jean-Pierre had declined any premature comment, while recalling that Washington “continues to take steps to protect American consumers (…) and ensure sufficient supply to meet demand“.
Technical organization or new geopolitical escalation?
Asked on his arrival about the reaction to expect from Washington, the Emirati Minister of Energy, Souhail ben Mohammed Al-Mazrouei, kicked into touch, saying that it was a “technical organization” not mixing political issues.
Also present, Saudi Prince Abdel Aziz bin Salman and Russian Deputy Prime Minister in charge of energy issues, Alexander Novak, are due to speak at a press conference.
A sharp drop in crude volumes suits Moscow, “and could therefore be perceived as a further escalation of geopolitical tensions“, commented Ipek Ozkardeskaya, analyst at Swissquote.
Stay ahead of a possible recession
Created in 1960 with the aim of regulating the production and price of crude oil, by establishing quotas, OPEC extended in 2006 to Russia and other partners to form OPEC+.
In a historic gesture, the members of the alliance had decided in the spring of 2020 on cuts of nearly 10 million in the face of the collapse in demand linked to the Covid-19 pandemic. A recipe that worked.
This time they want”be one step ahead of a possible recession through proactive measures“, explains Bjarne Schieldrop, of Seb.”This would allow them to avoid a possible accumulation of inventories and therefore low oil prices“.
Already in September, the group had slightly lowered its target (by 100,000 barrels) and said it was ready to do more. If the rumors are confirmed, it would be the biggest reduction since the shock of the pandemic.
After jumping at the start of the week, prices barely reacted on Wednesday around 1:00 p.m. GMT, at 91.84 dollars a barrel of Brent from the North Sea, and 86.36 dollars for a barrel of WTI, its American counterpart.