OPEC+ agreed to its deepest cuts to oil production since the 2020 COVID pandemic at a Vienna meeting on Oct. 5, curbing supply in an already tight market despite pressure from the U.S. and others to pump more.
The cut could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.
The U.S. had pushed OPEC not to proceed with the cuts, arguing that fundamentals don't support them, a source familiar with the matter said.
Sources said it remained unclear if cuts could include additional voluntary reductions by members such as Saudi Arabia, or if they could include existing under-production by the group.
OPEC+ fell about 3.6 million bbl/d short of its output target in August.
“Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of U.S. mid-term elections,” Citi analysts said in a note.
“There could be further political reactions from the U.S., including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill,” Citi said, referring to a U.S. antitrust bill against OPEC.
JPMorgan also said it expected Washington to put in place countermeasures by releasing more oil stocks.
Oil Prices Rise
Saudi Arabia and other members of OPEC+—which groups OPEC and other producers including Russia—have said they seek to prevent volatility rather than to target a particular oil price.
Benchmark Brent crude rose towards $93/bbl on Oct. 5, after climbing on Oct. 4.
The West has accused Russia of weaponizing energy, creating a crisis in Europe that could trigger gas and power rationing this winter.
Moscow accuses the West of weaponizing the dollar and financial systems such as SWIFT in retaliation for Russia sending troops into Ukraine in February.
The West accuses Moscow of invading Ukraine, while Russia calls its actions a special military operation.
Part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue, while Saudi Arabia has not condemned Moscow’s actions.
Relations have been strained between the kingdom and the administration of Biden, who travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy.
“The decision is technical, not political,” United Arab Emirates Energy Minister Suhail al-Mazroui told reporters ahead of the meeting.
“We will not use it as a political organization,” he said, adding that concerns about a global recession would be one of the key topics.
Russian Deputy Prime Minister Alexander Novak, who was put on the U.S. special designated nationals sanctions list last week, also travelled to Vienna to participate in meetings. Novak is not under EU sanctions.
Recommended Reading
US Drillers Cut Oil, Gas Rigs for Fifth Week in Six, Baker Hughes Says
2024-09-20 - U.S. energy firms this week resumed cutting the number of oil and natural gas rigs after adding rigs last week.
Western Haynesville Wildcats’ Output Up as Comstock Loosens Chokes
2024-09-19 - Comstock Resources reported this summer that it is gaining a better understanding of the formations’ pressure regime and how best to produce its “Waynesville” wells.
August Well Permits Rebound in August, led by the Permian Basin
2024-09-18 - Analysis by Evercore ISI shows approved well permits in the Permian Basin, Marcellus and Eagle Ford shales and the Bakken were up month-over-month and compared to 2023.
Kolibri Global Drills First Three SCOOP Wells in Tishomingo Field
2024-09-18 - Kolibri Global Energy reported drilling the three wells in an average 14 days, beating its estimated 20-day drilling schedule.
Permian Resources Closes $820MM Bolt-on of Oxy’s Delaware Assets
2024-09-17 - The Permian Resources acquisition includes about 29,500 net acres, 9,900 net royalty acres and average production of 15,000 boe/d from Occidental Petroleum’s assets in Reeves County, Texas.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.