Opec+ agreed on Monday to cut crude supply in a bid to prop up oil prices, defying calls from western governments battling to curb inflation in the face of a mounting global energy crisis.
The producer group will cut 100,000 barrels a day from supply from October, reversing an earlier increase of the same amount agreed last month following a visit to Jeddah by US president Joe Biden.
While traders said the amounts were relatively tiny in the global oil market, where demand is about 100 million barrels a day, the signal to Washington and the energy sector was more powerful: Opec and its allies, including Russia, will move to defend oil prices.
“This has a political dimension – Russia wants to make the West pay for the sanctions it has imposed on Moscow,” said Bill Farren-Price, a director at consultancy Enverus. “What better way than to get its Opec+ partners to start tightening the oil market. Biden’s hopes for some sort of accommodation with Saudi Arabia now look naive.”
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The policy reversal from Opec+ marks an end to months of supply increases during a rally that took Brent close to a record high earlier this year following Russia’s invasion of Ukraine. But a sell-off in recent weeks pushed Brent crude back below $100 a barrel, amid growing fears of recession in Europe and weaker oil demand from China.
– Copyright The Financial Times Limited 2022
