OPEC+ To Reduce Oil Output By 2 Million Barrels Per Day
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Summary:
- OPEC+ to reduce output to drive up prices.
- Energy costs have risen as a result of the supply shortage.
OPEC+ decision to reduce oil output
The biggest reduction in production since the epidemic began in 2020, OPEC+ said on Wednesday, October 5, that it will cut output by 2 million barrels per day (bpd). The decision was quickly criticized by the White House as "shortsighted," and the oil cartel was charged with "aligning with Russia."
President Joe Biden's advice to refrain from taking such a dramatic measure has not been heeded by Saudi Arabia, which controls approximately one-third of OPEC's oil reserves and is seen as a US ally. In order to persuade the de facto ruler of the kingdom, Crown Prince Mohammed Bin Salman, to increase the number of barrels pumped, Biden visited the country in the Middle East three months ago.
The output decrease is intended to raise oil prices back to the triple digits of dollars after a four-month decline. Oil prices have already risen to more than $90 a barrel as a result of anticipation of OPEC's decision this week.
Saudi Arabia's move, which is probably motivated by politics and oil pricing equally, reminds the West who is in charge of this valuable resource and has caused the US to rethink its foreign policy goals, including sanctions against Venezuela.
OPEC+ decision effects
Due to underproduction by OPEC and its partners, the actual production reduction will be less than 2 million. The coalition fell short of its goals by 3.58 million barrels per day in August. In Nigeria, for instance, pipeline theft and vandalism caused oil production to reach a 32-year low.
The true cuts will only amount to about 1 million bpd, according to Saudi Energy Minister Abdulaziz bin Salman, and analysts estimate even smaller reductions, as reported by Reuters.
Energy costs have risen as a result of the supply shortage, which has been made worse by Russia's involvement in the conflict in Ukraine. Biden used the US Strategic Petroleum Reserve earlier, in May, to control the rise in oil prices and, consequently, gasoline costs. He might have to turn to releasing more oil after the OPEC+ cuts.
Crude Oil Nov ‘22 Futures Price Chart
Sources: finance.yahoo.com
