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OPEC+ agrees to deep cuts in oil production, Biden calls it short-sighted

  • OPEC+ to cut production by 2 million bpd
  • Real cuts estimated at 1 million bpd due to underproduction
  • Biden criticizes the decision, calling it short-sighted
  • Saudi says West’s criticism is fueled by arrogance of wealth
  • Saudi says cuts are necessary due to rising interest rates

VIENNA/LONDON, Oct 5 (Reuters) – OPEC+ agreed to sharp oil output cuts on Wednesday, curbing supply in an already tight market, causing one of the biggest clashes with the West as the U.S. administration called the surprise decision short-sighted .

OPEC’s de-facto leader Saudi Arabia said the 2 million barrels per day (bpd) cut in output – equivalent to 2% of global supply – was necessary to respond to rising interest rates in the West and a weaker global economy.

The kingdom rejected criticism it was colluding with Russia, which is included in the OPEC+ group, to raise prices, saying the West was often driven by “arrogance of wealth” when criticizing the group.

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The White House said President Joe Biden will continue to consider whether to release additional strategic oil reserves to lower prices.

“The President is disappointed by the short-term decision by OPEC+ to cut production quotas while the global economy deals with the continuing negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine,” the White House said.

Biden faces low approval ratings ahead of midterm elections due to soaring inflation and has called on Saudi Arabia, a long-term US ally, to help lower prices.

US officials have said that part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue. Biden traveled to Riyadh this year, but was unable to secure any firm cooperation commitments in the energy field. Relations have been further strained as Saudi Arabia has not condemned Moscow’s actions in Ukraine.

The cut in oil supplies decided in Vienna on Wednesday could spur a recovery in oil prices, which have fallen to around $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

Saudi Energy Minister Abdulaziz bin Salman said OPEC+ had needed to be proactive as central banks around the world moved to “belatedly” tackle rising inflation with higher interest rates.


Wednesday’s 2 million bpd production cut is based on existing baseline numbers, meaning the cuts will be less deep because OPEC+ fell about 3.6 million bpd below its August production target.

Underproduction occurred due to Western sanctions against countries such as Russia, Venezuela and Iran and production problems with producers such as Nigeria and Angola.

Prince Abdulaziz said the real cuts would be 1.0-1.1 million bpd.

Analysts at Jefferies said they estimated the number at 0.9 million bpd, while Goldman Sachs put it at 0.4-0.6 million bpd and said cuts would come mainly from Gulf OPEC producers such as Saudi Arabia, Iraq, De United Arab Emirates and Kuwait.

Benchmark Brent crude rose above $93 a barrel on Wednesday.

The West has accused Russia of weaponizing energy, with soaring gas prices and a scramble to find alternatives creating a crisis in Europe that could trigger gas and power rationing this winter.

Moscow, meanwhile, accuses the West of weaponizing the dollar and financial systems such as the international payments mechanism SWIFT in retaliation for Russia sending troops into Ukraine in February.

Russian Deputy Prime Minister Alexander Novak, who was placed on the US sanctions list of specially designated nationals last week, also traveled to Vienna to attend meetings.

Novak is not subject to EU sanctions. He and other members of OPEC+ agreed to extend the cooperation agreement with OPEC by another year until the end of 2023.

The next OPEC+ meeting will take place on December 4. OPEC+ will move to meeting every six months instead of monthly meetings.

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Editing by Jan Harvey and Elaine Hardcastle

Our standards: Thomson Reuters Trust Principles.

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