Oil production: OPEC+ slashes quotas to support prices

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Oil productionOPEC+ slashes quotas to support prices

Members of the Organization of the Petroleum Exporting Countries have agreed to a drop of “two million” barrels per day at the risk of offending the White House.

Illustrative image taken on December 11, 2019 in the port of Ras al-Khair, about 185 kilometers north of Dammam in Saudi Arabia’s Eastern Province which overlooks the Gulf.

AFP

OPEC +, back in Vienna on Wednesday for the first time since March 2020, wanted to mark the occasion: it decided on a drastic cut in oil production quotas to support prices at the risk of offending the White House. The thirteen members of the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and their ten partners led by Russia have agreed to a drop of “two million” barrels per day for the month of November, the alliance said in a statement.

Prices at the pump on the rise?

“This is the largest reduction since the start of the pandemic,” reacted in a note Srijan Katyal, of the brokerage firm ADSS. It is likely to “boost prices,” he added, against Western efforts to stem soaring energy costs weighing on global growth. This decision comes “just when consumers breathed a sigh of relief”, prices at the pump having fallen sharply since this summer, recalls Craig Erlam, of Oanda. 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).

Joe Biden ‘disappointed’

US President Joe Biden is “disappointed with OPEC+’s short-sighted decision” to drastically cut oil production, according to a statement from the White House on Wednesday. “In view of today’s decision, the Biden administration will consult with Congress on additional tools and mechanisms to reduce the control (of the cartel of black gold producing countries, editor’s note) on energy prices”, also informed the American executive.

Such an announcement “will not be well received by the White House in the run-up to the midterm elections next month,” Tamas Varga had warned before the meeting at PV Energy. US President Joe Biden has been struggling for months to try to stem the soaring prices that are eroding household purchasing power, even going so far as to go to Riyadh in July during a very controversial visit.

Favorable to Moscow

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”, comments Ipek Ozkardeskaya, analyst at Swissquote.

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.

Immediately stable market

This time they want to “get a head start on a possible recession through proactive measures,” says Bjarne Schieldrop, from Seb. “Which 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 a barrel of WTI, its American counterpart.

Russia may use Nord Stream 2 gas pipeline again

Russia said on Wednesday it was ready to deliver gas to Europe via the Nord Stream 2 gas pipeline, one of the lines of which was not damaged by leaks, announced the Deputy Prime Minister in charge of Energy. , Alexander Novak.

“If the necessary legal decisions are taken by the Europeans regarding its certification and the removal of restrictions, I believe that Russia could, in a short period of time, supply gas through this line,” Mr Novak told television. Russian after the OPEC+ meeting.

(AFP)

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