OPEC+ agrees deep cuts to oil production despite U.S. pressure

VIENNA/LONDON - OPEC+ agreed its deepest cuts to oil production since the 2020 Covid pandemic at a Vienna meeting on Wednesday, curbing supply in an already tight market despite pressure from the United States 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 United States 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 barrels per day 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.

Saudi Arabia and other members of OPEC+ – which groups the Organisation of the Petroleum Exporting Countries 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 per barrel on Wednesday, after climbing on Tuesday.

The West has accused Russia of weaponising energy, creating a crisis in Europe that could trigger gas and power rationing this winter.