OPEC agreed to its biggest cuts in oil production since the COVID 2020 pandemic at an assembly in Vienna on Wednesday, restricting the source in an already tight market despite pressure from the US. U. S. and others to pump more.
The cut may spur a recovery in oil prices, which have fallen to around $90 from $120 3 months ago on fears of a global economic downturn, U. S. EM interest rates. The U. S. dollar and a stronger dollar.
The United States had urged OPEC not to make the cuts, arguing that the basics were not doing so, a source familiar with the matter said.
“Higher oil prices, if driven through significant production cuts, would most likely aggravate Biden’s tenure ahead of the U. S. midterm elections,” Citi analysts said in a note.
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“There may be other U. S. political reactions, adding more strategic action launches, as well as wild cards, adding the promotion of a NOPEC bill,” Citi said, referring to a U. S. antitrust bill opposing OPEC.
JPMorgan also said it expected Washington to implement countermeasures by freeing up more oil reserves.
OPEC resources said agreed production cuts of 2 million bpd or 2% of demand would be made from existing benchmarks.
Those cuts would be more superficial as OPEC fell about 3. 6 million barrels in line with the day below its production target in August.
Underproduction has occurred due to Western sanctions against countries such as Russia, Venezuela and Iran and production with manufacturers such as Nigeria and Angola.
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Goldman Sachs analysts said they estimated genuine production cuts would amount to 0. 4 to 0. 6 million bpd basically through OPEC’s Gulf manufacturers, such as Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.
Jefferies analysts said they estimated the cuts at 0. 9 million bpd.
RISING OIL PRICES
Saudi Arabia and other OPEC members, which includes the Organization of the Petroleum Exporting Countries and other producers in addition to Russia, have said they seek to avoid volatility rather than targeting a specific oil price.
Benchmark Brent crude traded Wednesday at $92 a barrel, after Tuesday.
The West has accused Russia of militarizing energy, creating a crisis in Europe that may lead to fuel and electric power rationing this winter.
Meanwhile, Moscow accuses the West of arming the dollar and monetary systems like SWIFT in retaliation for sending Russian troops to Ukraine in February.
While Saudi Arabia has condemned Moscow’s moves in Ukraine, U. S. officials have said part of the explanation for why Washington needs to reduce oil costs is to deprive Moscow of oil revenues.
Relations have been strained between Saudi Arabia and the Biden administration, which visited Riyadh this year but was unable to secure the company’s energy cooperation commitments.
“The resolution is technical, political,” UAE Energy Minister Suhail al-Mazroui told reporters ahead of the meeting.
“We will not use it as a political organization,” he said, adding that considerations of a global recession would be one of the key issues. , also traveled to Vienna to participate in meetings. Novak is not under European sanctions.