OPEC+ makes big oil cut to boost prices; pump costs may rise

Oct 4, 2022, 1:31 PM | Updated: Oct 5, 2022, 11:45 am
FILE - The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of...

FILE - The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen outside of OPEC's headquarters in Vienna, Austria, March 3, 2022. A cut in oil production is on the table when OPEC oil-producing countries meet Wednesday, Oct. 5. The OPEC+ alliance that includes Saudi Arabia and Russia is weighing a cut of a million barrels or more. (AP Photo/Lisa Leutner, file)

(AP Photo/Lisa Leutner, file)

FRANKFURT, Germany (AP) — The OPEC+ alliance of oil-exporting countries decided Wednesday to sharply cut production to support sagging oil prices, a move that could deal the struggling global economy another blow and raise politically sensitive pump prices for U.S. drivers just ahead of key national elections.

Energy ministers cut production by a larger-than-expected 2 million barrels per day starting in November after gathering for their first face-to-face meeting at the Vienna headquarters of the OPEC oil cartel since the start of the COVID-19 pandemic.

The group said the decision was based on the “uncertainty that surrounds the global economic and oil market outlooks.” Saudi Energy Minister Abdulaziz bin Salman stressed the cartel’s stated role as a guardian of stable energy markets.

“We are here to stay as a moderating force, to bring about stability,” he told reporters.

Besides a token trim last month, the major cut in the amount of crude that OPEC+ ships to the world is an abrupt turnaround from months of restoring deep cuts made during the depths of the pandemic. As demand rebounded, global energy prices have swung wildly since Russia invaded Ukraine, helping fuel inflation that is squeezing economies around the world.

The impact of the production cut on oil prices — and thus the price of gasoline made from crude — will be limited somewhat because OPEC+ members already can’t meet their quotas.

The decision could help alliance member Russia weather a looming European ban on most of Moscow’s oil and comes amid an energy crisis created by Russia reducing natural gas supplies to Europe, whose leaders call it retaliation for supporting Ukraine and imposing sanctions.

Oil is trading well below its summer peaks because of fears that major global economies such as the U.S. or Europe will sink into recession due to high inflation, rising interest rates and uncertainty over the war in Ukraine.

“We are going through a period of diverse uncertainties, which could come our way, it’s a brewing cloud,” bin Salman said, adding that OPEC+ sought to remain “ahead of the curve.”

The fall in oil prices has been a boon to U.S. drivers, who saw lower gasoline prices at the pump before costs recently started ticking up, and for U.S. President Joe Biden as his Democratic Party gears up for congressional elections next month.

“The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” the White House said in a statement. “At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices.”

The Biden administration will work with Congress on additional tools to reduce OPEC’s control over energy prices, the statement said.

Biden has tried to receive credit for gasoline prices falling from their average June peak of $5.02 — with administration officials highlighting a late March announcement that a million barrels a day would be released from the strategic reserve for six months. High inflation is a fundamental drag on Biden’s approval and has dampened Democrats’ chances in the midterm elections.

Oil supply could face further cutbacks in coming months when a European ban on most Russian imports takes effect in December. A separate move by the U.S. 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.

The EU agreed Wednesday on new sanctions that are expected to include a price cap on Russian oil.

Russia “will need to find new buyers for its oil when the EU embargo comes into force in early December and will presumably have to make further price concessions to do so,” analysts at Commerzbank said. “Higher prices beforehand — boosted by production cuts elsewhere — would therefore doubtless be very welcome.”

Dwindling prospects for a diplomatic deal to limit Iran’s nuclear program also have lowered prospects for a return of as much as 1.5 million barrels a day in Iranian oil to the market if sanctions are removed.

Oil prices surged this summer as markets worried about the loss of Russian supplies from sanctions over the war in Ukraine, but they slipped as fears about recessions in major economies and China’s COVID-19 restrictions weighed on demand for crude.

International benchmark Brent has sagged as low as $84 in recent days after spending most of the summer months over $100 per barrel. U.S. crude rose to $87.64, and international benchmark Brent went up to $93.21 after the decision.

At its last meeting in September, OPEC+ reduced the amount of oil it produces by 100,000 barrels a day in October. That token cut didn’t do much to boost lower oil prices, but it put markets on notice that the group was willing to act if prices kept falling.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

murders...
Associated Press

Appeals court upholds most Eyman campaign finance violations

A Washington state Court of Appeals on Tuesday upheld most of the campaign finance violations that longtime anti-tax initiative promoter Tim Eyman was found liable for last year.
19 hours ago
A Washington State Department of Agriculture worker displays an Asian giant hornet taken from a nes...
Associated Press

No northern giant hornets found in 2022 in Washington state

Citizen trapping of northern giant hornets in northwest Washington ended Nov. 30 without any confirmed sightings of the hornets this year, state officials said Tuesday.
19 hours ago
Peter Møller, center, attorney and co-founder of the Danish Korean Rights Group, submits the docum...
Associated Press

South Korea’s truth commission to probe foreign adoptions

SEOUL, South Korea (AP) — South Korea’s Truth and Reconciliation Commission will investigate the cases of dozens of South Korean adoptees in Europe and the United States who suspect their origins were falsified or obscured during a child export frenzy in the mid- to late-1900s. The decision Thursday opens what could be South Korea’s most […]
19 hours ago
FILE - Carolina Panthers owner David Tepper watches during warm ups before an NFL football game bet...
Associated Press

Panthers owner settles tax fight over failed practice space

COLUMBIA, S.C. (AP) — The South Carolina county where Carolina Panthers owner David Tepper started building and then abandoned a new practice facility has reached a settlement over $21 million in sales tax money given to the NFL team. Tepper will pay back the money, and York County agreed its dispute was totally resolved with […]
19 hours ago
Associated Press

Deep, 5.8 magnitude quake shakes Indonesia’s capital

JAKARTA, Indonesia (AP) — A strong and deep earthquake shook Indonesia’s capital and other parts of the main island Java on Thursday but there were no immediate reports of serious damage or casualties. High-rises in Jakarta, the capital, swayed for several seconds and some ordered evacuations. The U.S. Geological Survey said the 5.8 magnitude earthquake […]
19 hours ago
FILE - Military personnel watch as Air Force One, with President Donald Trump, aboard prepares to d...
Associated Press

Boeing’s last 747 to roll out of Washington state factory

SEATTLE (AP) — After more than half a century, the last Boeing 747 rolled out of a Washington state factory on Tuesday. The 747 jumbo jet has taken on numerous roles — a cargo plane, a commercial aircraft capable of carrying nearly 500 passengers, and the Air Force One presidential aircraft — since it debuted […]
19 hours ago

Sponsored Articles

Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.
SHIBA WA...

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Lake Washington Windows...

Choosing Best Windows for Your Home

Lake Washington Windows and Doors is a local window dealer offering the exclusive Leak Armor installation.
Anacortes Christmas Tree...

Come one, come all! Food, Drink, and Coastal Christmas – Anacortes has it all!

Come celebrate Anacortes’ 11th annual Bier on the Pier! Bier on the Pier takes place on October 7th and 8th and features local ciders, food trucks and live music - not to mention the beautiful views of the Guemes Channel and backdrop of downtown Anacortes.
Swedish Cyberknife Treatment...

The revolutionary treatment of Swedish CyberKnife provides better quality of life for majority of patients

There are a wide variety of treatments options available for men with prostate cancer. One of the most technologically advanced treatment options in the Pacific Northwest is Stereotactic Body Radiation Therapy using the CyberKnife platform at Swedish Medical Center.
Work at Zum Services...

Seattle Public Schools announces three-year contract with Zum

Seattle Public Schools just announced a three-year contract with a brand-new company to the Pacific Northwest to assist with their student transportation: Zum.
OPEC+ makes big oil cut to boost prices; pump costs may rise