OPEC, Allies Slash Output Of Crude --- Cut of 2 million barrels a day is expected to boost prices, aid Russia in Ukraine operation

"VIENNA -- The Organization of the Petroleum Exporting Countries and its Russia-led allies agreed on Wednesday to slash output by 2 million barrels of oil a day, delegates said, a move likely to push up already-high global energy prices and help oil-exporting Russia pay for its operation in Ukraine.

The move drew an immediate rebuke from the White House, which called the decision shortsighted and suggested the 23-member group, collectively known as OPEC+, was actively supporting President Vladimir Putin of Russia. It came less than three months after President Biden visited Saudi Arabia, the OPEC's de facto leader, in a bid to repair relations between the world's biggest oil consumer and its biggest crude-oil exporter during a period of rising inflation driven in part by high energy prices.

"It's clear that OPEC+ is aligning with Russia with today's announcement," White House press secretary Karine Jean-Pierre said.

In response, the president directed the release of 10 million barrels of oil from the U.S.'s Strategic Petroleum Reserve, the White House said, a move analysts said would have little impact on prices.

Administration officials also said they would consult with Congress on ways to rein in OPEC+'s power over energy prices, which analysts interpreted as a potential sign of support for legislation allowing antitrust action against foreign state-owned oil companies.

High gasoline prices helped drive down Mr. Biden's poll numbers earlier this year, though prices decreased over the summer. OPEC's move could spell more pain at the pump for U.S. motorists just before the midterm elections next month.

OPEC+ delegates privately said the move would be a big win for Russia, which has lost about a million barrels a day of oil production since the beginning of the operation in February.

On Dec. 5, Russia faces the prospect of a European Union oil embargo and a Group of Seven wealthy nations plan to cap the price of Russian oil, which threaten to further cut into its sales.

OPEC+'s production cuts could undermine those efforts, which are key to the West's economic struggle with Moscow during the operation in Ukraine.

The OPEC+ production cut will limit Russia's loss of market share, said delegates, who acknowledged it represented an unprecedented effort by the world's biggest oil producers to collectively help Russia with the political and economic problems caused by the operation in Ukraine.

Speaking to Bloomberg television after the meeting, Deputy Prime Minister Alexander Novak of Russia said the cuts were needed to "balance the market out."

He said Russia wouldn't sell oil to countries that adopt the price cap, predicting an oil-supply deficit this year.

The oil-production cut is the biggest from the group since April 2020, signaling its intent to keep prices high after enduring seven years of a relatively subdued market, oil-industry analysts said.

After surging above $100 a barrel in the first six months of the year over Russia's operation in Ukraine, oil prices had fallen 32% over the past four months on global economic worries, with international benchmark Brent crude dropping below $83 a barrel for the first time since January. Brent settled up 1.7% to $93.37 a barrel on Wednesday, having risen steadily on expectations of a production cut in recent days.

The OPEC+ decision came against a backdrop of slowing economic growth globally. On Wednesday, the World Trade Organization said global trade in goods is set to slow sharply next year, possibly easing high inflation but raising the risk of a recession.

After the meeting, OPEC+ members framed any decision as a technical response to a flagging global economy, especially in China, where Covid-19 restrictions have hurt oil demand.

The Saudi energy minister, Prince Abdulaziz bin Salman, rejected the implication that the production cut would hurt the U.S. relationship and said the decision was based on projections showing oil demand waning with economic growth.

"Tell me where is the act of belligerence," he said in response to a question about the U.S., in a news conference at OPEC's headquarters in Vienna. "We shall act and react to what is happening to the global economy in the most responsible and responsive way."

Prince Abdulaziz cut off reporters who tried to ask about the White House statement, saying he would discuss only "oil policy and energy policy and technicalities. This is way above our pay grade."

Still, OPEC+ delegates said their interests would be well served by the decision by boosting the revenue their petrostates need.

Two million barrels of oil amounts to about 2% of the world's daily oil production, though the effect on the day-to-day world of oil sales could be far less.

OPEC+ cut its crude-oil output targets from 43.8 million barrels a day to 41.8 million barrels a day, but the group has been undershooting its targets by as much as 3 million barrels a day this year.

"The actual hit to oil supply will be much smaller," said Capital Economics in a note, predicting that Brent crude prices will end the year at $100 a barrel.

OPEC+ delegates said the cut would amount to about 600,000 barrels a day less than what producers are actually pumping now.

Energy Aspects, a London research consulting firm, said it could amount to a cut of about a million barrels from the group's daily output, an estimate the Saudi energy minister also gave.

"If we have to do more, we will do more," said Suhail Al Mazrouei, the energy minister of the United Arab Emirates." [1]

Where is Lithuanian minister of foreign affairs? Is he sleeping with queen Morta?

1. OPEC, Allies Slash Output Of Crude --- Cut of 2 million barrels a day is expected to boost prices, aid Russia in Ukraine operation
Faucon, Benoit; Said, Summer. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 Oct 2022: A.1.