FRANKFURT, Germany (AP) – OPEC and allied oil-producing nations, including Russia, made a small cut in supplies to the global economy on Monday, underscoring their unhappiness as recession fears help push down crude oil prices — along with gasoline coststo the delight of the drivers.
The October decision rolls back a largely symbolic increase of 100,000 barrels per day in September. It follows a statement last month by Saudi Arabia’s energy minister that the OPEC+ coalition could cut production at any time.
Oil producers such as Saudi Arabia have resisted calls from US President Joe Biden to pump more oil to lower petrol prices and the burden on consumers. OPEC+ has stuck with only cautious increases to compensate for deep cuts made during the COVID-1[ads1]9 pandemicwhich was finally restored in August.
Since then, growing concerns about falling future demand have helped send oil prices down from June peaks above $120 a barrel, cutting into the windfall for OPEC+ countries’ coffers but proving a boon for drivers in USA as pump prices have eased.
The October supply cut is just a small fraction of the 43.8 million barrels per day below the OPEC+ production target, but missed several analysts’ predictions of no change in output. Oil prices rose after the announcement.
US crude rose 3.3% to $89.79 a barrel, while the international benchmark Brent rose 3.7% to $96.50 after the decision.
The amount of oil per day “may seem insignificant, but the message from today’s cuts is clear: OPEC+ believes they have cut enough,” Columbia University energy policy expert Jason Bordoff tweeted.
Oil prices have stiffened in recent months: Fear of a recession has pushed them down, while worrying about the loss of Russian oil due to sanctions against the invasion of Ukraine pushed them up.
Recently, fears of a recession have taken over. Economists in Europe expect a recession at the end of this year due to soaring inflation fueled by energy costswhile China’s strict restrictions aimed at stopping the spread of the coronavirus have dampened growth in the major world economy.
Falling oil prices have been a boon for American driversand sending gas prices down to $3.82 a gallon from a record high of more than $5 in June and offering a potential boost to Biden as his Democratic Party heads into the midterm elections.
“The president has been clear that energy supply should meet demand to support economic growth and lower prices for American consumers and consumers around the world,” White House Press Secretary Karine Jean-Pierre said. “President Biden is determined to continue taking all necessary steps to strengthen energy supplies and lower energy prices.”
In June, fears that US and European sanctions would take Russian oil out of the market helped push Brent above $123. Prices have fallen sharply in recent weeks when it became clear that Russia is still able to sell significant amounts of oil in Asiaalbeit at heavily discounted prices.
But concerns about the loss of Russian supply are still out there because European sanctions aimed at blocking most Russian oil imports will not take effect until the end of the year.
Other factors lurk that can affect the oil price. First, the Group of Seven wealthy democracies plans to impose a price cap on Russian oil aimed at fighting high energy prices and reducing oil profits that Russia can use for its war in Ukraine.
That is if the cap works as intended. Russia can refuse to supply oil to countries and companies that observe the tariff, which will take hold from the market. The price cap has not been set and its influence on the global price remains unclear.
Meanwhile, a deal between Western countries and Iran to curb Tehran’s nuclear program could ease sanctions and see more than 1 million barrels per day of Iranian oil return to the market in the coming months. However, tensions between the US and Iran appear to have risen in recent days: Iran captured two US Navy drones in the Red Sea, and US, Kuwaiti and Saudi warplanes flew over the Middle East on Sunday in a show of force.
OPEC+ energy ministers said their September increase of 100,000 bpd was for that month only and that the group could meet again at any time to address market developments.
Associated Press writer Will Weissert in Milwaukee contributed.