Oil prices to rise as two million fewer barrels to be produced each day

Business

Two million fewer barrels of oil are to be produced each day, equivalent to 2% of global supply, the Organisation of the Petroleum Exporting Countries (Opec) and Russia have agreed.

The move is an effort to increase prices in countries feeling the heat from high energy costs.

Members Saudi Arabia and Russia have led the group to cut output which is the sharpest decline since the early days of the pandemic when demand collapsed and oil prices dropped steeply.

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The announcement has been widely expected and oil prices had risen 5% since Friday. The benchmark of oil prices, Brent crude, rose to $91.95 (£81.69) following news of the production cut.

Prices had dropped to about $90 (£79.93) a barrel, down from highs of $120 (£107) three months ago, amid fears of a global economic recession that would reduce demand.

Officials in the Joe Biden Whitehouse had been lobbying Opec members to avoid production cuts which would raise oil prices in the run-up to the American midterm elections.

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Analysis:
Slashing oil production is a big two fingers to the US

Since Russia’s invasion of Ukraine, the Biden administration has called for production to be kept high to ease energy security and reduce price pressure.

The White House responded angrily by calling the decision “short-sighted” and a “mistake”. White House press secretary Karine Jean-Pierre added it showed a clear decision by Opec to line up against the US and the west.

“It’s clear that OPEC+ is aligning with Russia with today’s announcement,” she said.

That characterisation had been rebuked before it was made.

“The decision is technical, not political,” United Arab Emirates Energy Minister Suhail al-Mazroui told reporters ahead of the Opec meeting.

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“We will not use it as a political organisation,” he said, adding that concerns about a global recession would be one of the key topics.”

France has already experienced oil supply issues but denied experiencing a shortage. On Wednesday the country ate into strategic reserves to cope with supply issues at some petrol stations and gave priority access to healthcare workers.

Iraq’s oil minister spoke on Wednesday to say his country’s oil exports will not be affected by Opec’s output cut.

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