Oil prices rise after OPEC+ agreed to cut production by 2 million bpd, extending winning streak to 3rd session

Oil prices rise after OPEC+ agreed to cut production by 2 million bpd, extending winning streak to 3rd session

Oil prices rose on Wednesday after OPEC and its allies agreed to cut oil production by 2 million barrels a day, extending a winning streak for the market that saw prices soar above $100 a barrel earlier this year.

The group, which includes Saudi Arabia and the United Arab Emirates, said at its meeting in Vienna that production curbs would take effect from November, the biggest cut since the global COVID-19 outbreak accelerated in 2020.

West Texas Intermediate crude advanced 1.3% to $87.65 a barrel. Brent crude, the international benchmark, rose 1.6% to $93.28. Oil prices rose for the third session in a row. WTI strengthened to 8.8% in the previous two sessions before the OPEC+ meeting. Prices also found strength Wednesday from a report from the U.S. Energy Information Administration that showed weekly crude inventories fell by 1.4 billion barrels, confounding expectations for a stockpile increase.

OPEC+ said its latest decision was taken “in light of the uncertainty surrounding the outlook for the global economy and the oil market”.

The move comes as oil prices have tumbled from this year’s highs well above $100 a barrel, with gains fueled by fears of a supply shortage after major oil giant and OPEC+ member Russia invaded Ukraine seven months ago.

But prices have since eased as fears grow that the global economy will be pushed into recession as central banks battling high inflation raise borrowing costs. The jump in the US dollar this year, as the Federal Reserve aggressively raises interest rates, has also made dollar-denominated oil purchases more expensive for holders of other currencies.

“The larger OPEC+ group has consistently failed to meet required production levels — a problem that appeared problematic earlier this year as the market jittered over the potential loss of Russian barrels. But global oil inventories have started to rise as demand has cooled. The U.S. released oil from strategic reserves and Russian production has proved more durable than some thought,” Peter McNally, global sector head of industrials, materials and energy at research firm Third Bridge, said in a note.

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OPEC+ “will continue to need monthly meetings to steer the market. A looming EU ban on imports from Russia comes into effect on December 5, and OPEC, particularly Saudi Arabia and the United Arab Emirates, could find themselves adding barrels again if the situation like chaotic,” he said. McNally.

US President Joe Biden reportedly said he was “disappointed” with the OPEC+ decision, calling it “short-sighted”. CNN reported earlier Wednesday that the White House tried to dissuade OPEC+ from deeply cutting production targets. Supply cuts could push up US gas prices ahead of November’s midterm elections.

Biden met with Saudi Arabia’s de facto leader, Crown Prince Mohammed Bin Salman, in July but failed to reach an agreement for the country to increase supplies.

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