OPEC+ agrees on oil output cut

The OPEC+ oil cartel agreed Monday to cut production for the first time in more than a year as it seeks to lift prices that have tumbled due to recession fears.

The move could irk the United States as it has pressed the group to increase output in order to bring down energy prices that have fuelled decades-high inflation.

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OPEC+, a 23-nation coalition led by Saudi Arabia and Russia, had agreed to huge cuts in output in 2020 when the Covid pandemic sent oil prices crashing, but it began to increase production modestly again last year as the market improved.

Oil prices soared to almost $140 a barrel in March after Russia invaded Ukraine.

But they have since receded below $100 per barrel amid recession fears, Covid lockdowns in major consumer China and Iran nuclear talks that could bring Iranian crude back into the market.

While analysts had expected another modest increase at Monday’s ministerial meeting, OPEC+ said in a statement that it decided to reduce output by 100,000 barrels per day in October, returning to the production level of August.

The group also left the door open to holding talks prior to its next scheduled meeting on October 5 “to address market developments, if necessary”.

“First and foremost it is a clear message from the group: OPEC+ will not allow the oil price to slide. Further cuts will be initiated if necessary,” Bjarne Schieldrop, chief commodities analyst at SEB research group, told AFP.

While analysts said the cut was mostly symbolic, oil prices rose by more than three per cent following the announcement, with the international benchmark, Brent, exceeding $96 per barrel while the US contract, WTI, reached almost $90.

At its last meeting, OPEC+ agreed to a small rise of 100,000 barrels per day for September after US President Joe Biden travelled to Saudi Arabia to plead for a production bump – although it was six times lower than its previous decisions.

Energy Minister Abdulaziz bin Salman last month had appeared to open the door to the idea of cutting output, which has since received the support of several member states and the cartel’s joint technical committee. (AFP)