OPEC+ is considering cutting the production limit by up to two million barrels a day

OPEC+ is considering its biggest output cut since 2020 as it seeks to stabilize oil prices, a move that risks stoking tensions with Washington.

The group will discuss cutting its production limits of up to 2 million barrels per day based on the current baseline, delegates said. In reality, however, the move will have less of an impact on global supply as several countries are already pumping below their quotas. They could also discuss smaller cuts of 1-1.5 million, delegates said.

A large cut in OPEC+ risks another shock to the global economy, which is already battling energy-cost-driven inflation. It will anger the US – and possibly trigger a reaction from Washington. President Joe Biden visited Saudi Arabia earlier this year in search of higher production and lower pump prices for Americans ahead of November’s midterm elections.

“It’s hard to overstate how concerned the Biden administration is about a possible rebound in oil prices,” said Bob McNally, founder of Rapidan Energy, in Vienna. “A large cut in OPEC+ would anger the White House, although officials may wait to see how prices react afterwards before triggering policy responses.”

White House officials have already asked the US Department of Energy to analyze whether an export ban on gasoline, diesel and other refined petroleum products would lower prices, Bloomberg reported on Tuesday. It’s a controversial idea, but one that’s gaining traction in some corners of the Biden administration.

As OPEC+ ministers meet in Vienna, European and American leaders are working to curb the revenues Moscow receives from oil in an attempt to weaken Vladimir Putin’s war machine. The EU is expected to pass a new package of sanctions that will severely limit Russia’s ability to sell crude oil, while the US works with allies to impose a price cap on Russian oil.

OPEC+’s move goes in the opposite direction, underscoring tensions in US-Saudi Arabia relations and the continued strength of Saudi ties with Moscow despite the war. Russian Deputy Prime Minister Alexander Novak is expected to be present in Vienna in person, causing a diplomatic headache for the European Union.

Oil futures jumped Tuesday and traded broadly flat ahead of Wednesday’s meeting in Vienna.

A massive cut would reflect the group’s concerns about the global slowdown and its impact on demand. But in reality, the impact on the market would be less than the headline number. Because several members are already pumping well below their official quotas, they could automatically meet their new limit without having to throttle production. Still, it would be the cartel’s biggest cut since the deep cuts agreed at the start of the Covid-19 pandemic in 2020.

https://www.independent.ie/business/world/opec-considers-output-limit-cut-of-as-much-as-two-million-barrels-a-day-42041652.html OPEC+ is considering cutting the production limit by up to two million barrels a day

Fry Electronics Team

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