Oil prices are expected to rise after the OPEC+ alliance decided to significantly reduce production by 2 million barrels per day, the first of this magnitude since 2020. Prices have also been supported by Moscow’s warnings that it will not sell crude to any country that adopts the idea of capping the price of Russian crude.
Brent crude futures rose 22 cents, or 0.2 percent, to $93.59 a barrel. U.S. West Texas Intermediate crude futures rose 22 cents, or 0.3 percent, to $87.98.
During their first face-to-face meeting since 2020 in Vienna, OPEC + said that a production cut of 2 million barrels per day (bpd) had been agreed on starting November.
Goldman Sachs raised its fourth-quarter oil price forecast by $10 to $110 a barrel, following the OPEC+ decision.
Saudi Energy Minister Abdul Aziz bin Salman said after the meeting that OPEC+’s priority was to “maintain a sustainable oil market.” “OPEC+ will remain as a key force for the stability of the global economy, as the magnitude of the uncertainty we are currently going through is unprecedented. The actual production cut will be between 1 million and 1.1 million barrels per day,” he said, noting that some coalition countries are not producing on the ground their agreed share.
Acting Kuwaiti Oil Minister Mohammed Al-Fares said the OPEC+ decision would have positive repercussions on oil markets. The Kuwait News Agency quoted Al-Fares as saying, “This decision makes us face a great responsibility to follow up on market developments in terms of reducing production in the event of an increase in supply or an increase in production quantities when more oil supplies are needed.”
Iraqi Oil Minister Ihsan Abdul Jabbar expressed hope that the agreement will contribute to stabilizing global markets and supporting crude oil prices.
U.S. President Joe Biden’s administration has criticized the deal as “short-sighted.”
The White House said it would consult Congress to find additional pathways to reduce OPEC+ control over energy prices, an apparent reference to legislation that could expose members of the group to antitrust lawsuits.
White House spokeswoman Karen Jean-Pierre said the decision was “a mistake,” adding: “It is clear that with his decision today, OPEC+ is on Russia’s side.”
Ceiling Russia’s oil price
The OPEC+ decision came at a time when the EU appears ready to agree to cap the price of Russian oil exports this week as part of a coordinated plan with the Group of Seven countries seeking to curb Moscow’s oil revenues without curbing global supplies.
The Czech Republic, which currently holds the rotating presidency of the European Union, said on Wednesday that ambassadors of member states in Brussels had approved a new package of sanctions that includes price caps.
A final consensus is expected in the coming days, except for any last-minute objections from Member States.
But, Russian Deputy Prime Minister Alexander Novak, who participated in the OPEC+ meeting, responded by saying Russia might cut oil production if the West imposes a cap on the price of its crude.
The Saudi energy minister said: “We don’t know how the ceiling on the price of Russian oil will be imposed.”
Total Energies CEO Patrick Pouyanne said setting a cap on the price of Russian oil was a “bad idea”, one that would strengthen the Russian president’s control.
Speaking at the Energy Intelligence Forum in London, he added: “I think it’s a bad idea because it’s a way that will benefit (Russian President) Vladimir Putin… What I’m sure of is that if we do, Putin will say: We’re not going to sell our oil. The price won’t be $95, it’ll be $150. This is not something I want to give Vladimir Putin.”
The price cap plan, approved by the Group of Seven, calls on participating countries to refuse insurance, financing, brokerage, navigation, and other services for oil shipments priced above a price cap that has not yet been set on crude oil and petroleum products.