At its meeting Wednesday, OPEC+ member states agreed to a production cut of 2 million barrels per day, double the amount most analysts were expecting. The reduction will be the largest production cut since early 2020, when the cartel rushed to reduce production to avoid a glut from the massive drop in consumption due to the pandemic.
OPEC said it took the step “in light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive, and preemptive, which has been consistently adopted” by the cartel.
Given how much more aggressive the cuts were than what had been anticipated, experts predict it will significantly stem the drop in crude prices which had been seen lately.
It was the first in-person meeting held by the OPEC+ group, since the pandemic began in early 2020.
The decision was attacked by allies of the White House, which had been lobbying frantically against a cut of even 1 million barrels per day, based on fears that suddenly rising energy costs will reignite inflation and raise gas prices, just as Americans head to the polls to vote in the midterm elections in November.
On Tuesday, CNN had reported, according to an unnamed senior official, that the White House was “having a spasm and panicking” over the prospect of the estimated cuts of 1 million barrels per day. The White House’s lobbying efforts were described as “taking the gloves off.” After the announcement of cuts double that of the estimates, the White House released talking points describing the cuts as “a hostile act” and a “total disaster.”
OPEC members however characterized the cuts as a “technical, not a political decision,” and cited the risks of a potential global recession as contributing to the cuts.
When reporters asked Suhail Al Mazrouei, the energy minister of the United Arab Emirates (UAE), if the cuts would damage relations with the United States, he responded that OPEC is a “technical” and not a political organization.
The cuts will go into effect in November, though their effects on the market will be immediate.
