(The Hill) – The Organization of the Petroleum Exporting Countries (OPEC) and its oil exporting allies announced a 2-million-barrel-per-day oil production cut on Wednesday, accepting months of pressure from Washington to increase production and potentially raise gas prices again. .
The coalition, which includes 13 OPEC countries and 11 non-members including Russia, made the announcement at its Vienna meeting, the first people-to-people gathering since the start of the COVID-19 pandemic. The announced cuts are roughly equivalent to 2% of global supply.
In July, President Biden visited Saudi Arabia to directly appeal to its leaders to increase oil production, even though his administration has often been criticized for the kingdom’s human rights record. After the meeting, Saudi Arabia announced an increase in production, but a smaller one than the US had requested.
The cut announced by OPEC + is about twice the amount that the US releases every day from strategic crude reserves. White House press secretary Karine Jean-Pierre said Tuesday that the release of future strategic petroleum reserves has not been discussed.
It’s unclear what the immediate impact of the domestic gas price cut will be, but it could lead to an increase in the week before the midterms after the Biden administration recently announced lower prices. Initial reports put oil prices up about $3 a barrel Wednesday morning. Prices have fallen from around $120 a barrel in June to around $80 a barrel amid concerns about a potential global recession.
Meanwhile, OPEC+ production cuts could also benefit Russia by supporting the Kremlin’s own oil revenues before European Union sanctions come into force in December.
Rep. Ro Khanna (D-Calif.), a frequent critic of Saudi Arabia’s leader, blasted the reported cuts, told CNN that the US should respond by withdrawing arms sales.
“President Biden must make it clear that we will stop supplying the Saudis with weapons and air parts if they abandon the American people and empower Putin by making drastic production cuts,” Khanna said in a statement. “They need us more than we need them.”
Quincy Krosby, Chief Global Strategist for LPL Financial, noted in a statement that the market has braced for a much larger cut, and that Russia had also sought a large reduction, suggesting the announcement was a compromise option.
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