Page 6 - NorthAmOil Week 40 2022

NorthAmOil COMMENTARY NorthAmOil

OPEC+ makes 2mn bpd

cut, angering the US

Months of badgering by Western leaders counted for

nought this week as OPEC+ announced a 2mn bpd

quota reduction that serves to bolster prices and
cover up issues raising production

GLOBAL THE OPEC+ group of oil producers made the
decision to cut combined output by 2mn barrels
WHAT: per day (bpd) when they met in person this week
The reduction will lead to for the first time since the coronavirus (COVID-
an effective output drop 19) pandemic began. It comes despite fears about
of around 1mn bpd. the state of the global economy and follows a
lengthy period during which Middle Eastern
WHY: oil producers in particular have been urged to
Price volatility, increase output as they near theoretical output
concerns about future highs.
upward production The reduction was the group’s second in as
and dedication to the many months, with September’s decision wip-
long-standing deal are ing out the 100,000 bpd added to output in
all thought to have been August.
factors in the decision. Over the previous 18 months OPEC+ had
been working to return around 10mn bpd of
WHAT NEXT: supplies taken off the market to stem the mas-
The US has called out sive losses experienced by oil exporting nations
the move, threatening when crude prices plummeted in Q2 2020.
action to reduce OPEC’s The slow build-back ensured that prices rose US President Joe Biden
influence on the market. steadily, but renewed volatility amid conflict is concerned about
and concerns about demand has necessitated challenging midterm election. upward pressure on
action in the opposite direction as many market However, despite widespread pressure, the fuel prices ahead of a
commentators opine that the group now views group’s top producers – Saudi Arabia and Rus- challenging midterm
$90 per barrel as a non-negotiable price floor, sia – have stuck by each other, appearing to have election.
though the Saudi government has vehemently learnt from the folly of their short-lived price
denied any desire to control prices. war that coincided with the start of the pan-
demic, and members said that the reductions
Criticism and collaboration were required “in light of the uncertainty that
The cut drew immediate criticism from major surrounds the global economic and oil market
consuming nations, led by the US, whose Pres- outlooks.”
ident Joe Biden lobbied hard earlier in the year With sanctions constraining the market
to encourage OPEC+ members to raise output. for Russian crude as its ‘military operation’
The White House published a statement in Ukraine continues and Moscow moves to
by National Security Advisor Jake Sullivan annexe four south-eastern regions of its neigh-
and National Economic Council Director bour, Riyadh has refrained from criticism, per-
Brian Deese, which said Biden had been “dis- haps with an eye on the stability of oil relations
appointed by the short-sighted decision by and another on its own long-running military
OPEC+ to cut production quotas while the campaign in Yemen.
global economy is dealing with the continued Russia was reported to be keen to cut out-
negative impact of Putin’s invasion of Ukraine”. put by 1mn bpd, while Saudi Arabia had been
The true source of this disappointment is likely rumoured to be considering an additional, uni-
to be the upward pressure it will have on fuel lateral cut in the region of 500,000 bpd.
prices just over a month before Biden faces a The two countries account for more half of

P6 www. NEWSBASE .com Week 40 06•October•2022