OPEC+, a group of oil-exporting countries, announced that oil production would be sharply cut down starting in November. The move is expected to drive up gas prices, dealing another blow to the struggling world economy. The organisation decided to cut production by 2 million barrels per day.
In a statement released on Wednesday, the alliance said that after accounting for “the uncertainty that surrounds the global economic and oil market outlooks.”
“We are here to stay as a moderating force, to bring about stability”, Saudi Arabia Energy Minister Abdulaziz bin Salman told reporters after the announcement.
The news comes nearly a month before the midterm elections in the United States. The decision may reverse the lowering of gas prices enjoyed by consumers after a sharp rise was recorded. The White House said that would not further tap into its strategic reserves.
Oil supply could face further cutbacks in coming months when a European ban on most Russian imports takes effect in December, news agency Associated Press reported.
A separate move by the US and other members of the Group of Seven wealthy democracies to impose a price cap on Russian oil could reduce supply if Russia retaliates by refusing to ship to countries and companies that observe the cap.
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The Russia-Ukraine factor
Over the past two years, OPEC+ had been keeping the crude prices in line with the global economy, which was still recovering from the impact of COVID-19. However, global energy prices have swung wildly since Russia invaded Ukraine, fueling inflation that is squeezing economies around the world.
The OPEC+ decision could help alliance member Russia weather a looming European ban on oil imports. But the impact of the production cut on oil prices — and thus the price of gasoline made from crude — will have some limitations because OPEC+ members already can’t meet their quotas.