Frankfurt, Germany (AP) – The Organization of the Petroleum Exporting Countries and allied oil producing countries, including Russia, have made a slight reduction in their supply to the global economy On Monday, to underscore their dissatisfaction as recession fears help bring down crude oil prices – along with the cost of gasolineTo please drivers.
The October decision backs off a mostly token increase of 100,000 barrels per day in September. This follows a statement last month from the Saudi Energy Minister that the OPEC+ alliance may cut production at any time.
Oil producers such as Saudi Arabia have resisted calls from US President Joe Biden to pump more oil to lower gasoline prices and the burden on consumers. OPEC+ is sticking with cautious increases just to make up for the deep cuts made during the COVID-19 pandemicwhich was finally restored in August.
Since then, mounting concerns about sagging future demand has helped pull oil prices from June’s highs of over $120 a barrel, paring windfall gains for OPEC+ coffers, but it proved a boon for U.S. drivers with lower pump prices.
The October supply cut is only a small part of the 43.8 million barrels per day under OPEC+ production targets, but it is wrong for many analysts’ expectations of no change in production. Oil prices jumped after the announcement.
US crude rose 3.3 percent to $89.79 a barrel, while Brent crude rose 3.7 percent to $96.50 after the decision.
The amount of oil for the day “may seem small, but the message from today’s cut is clear: OPEC+ thinks it’s gone down enough,” Columbia University energy policy expert Jason Bordoff said in a tweet.
Oil price movements in recent months: Recession fears pushed them down, while fears of losing Russian oil to sanctions over its invasion of Ukraine push them.
Lately, depression fears have taken hold. Economists in Europe are beginning to stagnate at the end of this year due to the massive rise in inflation fueled by energy costswhile strict restrictions imposed by China aimed at stemming the spread of the Corona virus have dampened growth in that major global economy.
Low oil prices were a boon for American driverssending gasoline prices down to $3.82 a gallon from record highs of more than $5 in June and offering a potential boost to Biden as his Democratic Party heads into the midterm elections.
“The president has been clear that energy supplies must meet demand to support economic growth and lower prices for American consumers and consumers around the world,” White House Press Secretary Karen-Jean-Pierre said. “President Biden is determined to continue to take every necessary step to support energy supplies and lower energy prices.”
In June, concerns that US and European sanctions would pull Russian oil from the market helped push Brent over $123. Prices have fallen sharply in recent weeks as it became clear that Russia can still sell large quantities of oil in Asiaalbeit at sharply discounted prices.
But concerns about the loss of Russian supplies remain because European sanctions aimed at blocking most Russian oil imports will not take effect until the end of the year.
There are other underlying factors that can influence the price of oil. For example, the Group of Seven wealthy democracies plan to impose a ceiling on Russian oil prices It aims to fight rising energy prices and reduce the oil profits that Russia can use in its war in Ukraine.
That is if the cap is working as intended. Russia can refuse to supply oil to countries and companies that adhere to the cap, which could lead to the removal of barrels from the market. The price cap has not been established, and its impact on the world price remains unclear.
Meanwhile, a deal between Western countries and Iran to curb Tehran’s nuclear program could ease sanctions and see more than 1 million barrels per day of Iranian oil return to the market in the coming months. However, tensions between the United States and Iran appear to have risen in recent days: Iran seized two US Navy planes in the Red Sea, and US, Kuwaiti and Saudi warplanes flew over the Middle East on Sunday in a show of force.
The energy ministers of the OPEC+ countries said that the increase in September of 100,000 barrels per day was only for that month and that the group may meet again at any time to address market developments.
Associated Press contributing writer Will Weissert in Milwaukee.
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