OPEC+ Considers Output-Limit Cut of as Much as Two Million Barrels a Day

  • In Business
  • 2022-10-05 08:07:39Z
  • By Bloomberg

(Bloomberg) -- Sign up for our Middle East newsletter and follow us @middleeast for news on the region.

OPEC+ is considering its biggest production cut since 2020, a move Washington is trying to head off with furious diplomatic efforts.

The group is set to discuss a cut to its output limits of as much as 2 million barrels a day, using current targets as a starting point. While a significant move, the actual impact on global supply would be smaller because several countries are already pumping below their quotas.

US officials are making calls to counterparts in the Gulf trying to push back against the move, according to people familiar with the situation.

OPEC+ is also considering smaller reductions of 1 million to 1.5 million barrels a day, delegates said. Even a cut on that scale would be a blow to a global economy that is already suffering historic inflation shocks. Washington is looking at potential responses, as President Joe Biden tries to tame pump prices ahead of mid-term elections in November.

"It is hard to overstate how anxious the Biden administration is about a potential resurgence in oil prices," Bob McNally, founder of Rapidan Energy, said in Vienna. "A large OPEC+ cut would antagonize the White House though officials may wait to see how prices respond afterward before pulling the trigger on policy responses."

It's a particular blow for Biden after his visit to Saudi Arabia earlier this year in search of a new oil deal. And it underscores the strains in the US-Saudi relationship, set against the enduring strength of the kingdom's ties with Moscow despite the war. Russia's Deputy Prime Minister Alexander Novak is due to attend in person in Vienna, adding to the diplomatic angst.

US Response

Already, White House officials have asked the US Energy Department to analyze whether a ban on exports of gasoline, diesel and other refined petroleum products would lower prices, Bloomberg reported on Tuesday. It's a controversial idea but one that's gaining traction in some corners of the Biden administration.

As OPEC+ ministers meet in Vienna, European and US leaders are working to curb the revenues that Moscow receives from oil to try to weaken President Vladimir Putin's war machine. The EU is set to approve a new sanctions package that will severely curtail Russia's ability to sell crude, while the US is working with allies to implement a price cap on Russian oil.

Oil futures jumped on Tuesday and traded broadly flat on Wednesday.

The US may also consider resorting again to using its Strategic Petroleum Reserve to tame prices, according to some analysts.

"The move from OPEC+ could trigger US countermeasures, including the additional releases from the Strategic Petroleum Reserve," JP Morgan analysts said in a note.

A massive cut would reflect the group's concerns about the global slowdown and its impact on demand. But in reality the impact on the market would be less than the headline number. That's because several members are already pumping far below their official quotas, meaning they could automatically be in compliance with their new limit without having to curb production. Still, it would be the cartel's largest reduction since the deep cuts agreed at the outset of the Covid-19 pandemic in 2020.

"This is an important meeting," United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters in Vienna on Wednesday.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.


More Related News

`The economy
`The economy's at risk': Biden urges Congress to stop rail strike, fund government

President Joe Biden sat down with congressional leaders Tuesday as lawmakers face a hefty to-do list before leaving town for the holidays.

Congress lines up behind Biden
Congress lines up behind Biden's strike plan - but it might not be quick

On Monday, Biden urged Congress to pass legislation to force the tentative agreement into effect.

U.S. House to vote Wednesday to block rail strike
U.S. House to vote Wednesday to block rail strike

The U.S. House of Representatives plans to vote Wednesday to block a potential a U.S. rail strike after President Joe Biden warned of the dire economic...

Biden to host congressional leaders on lame-duck sprint
Biden to host congressional leaders on lame-duck sprint

President Joe Biden hosted congressional leaders at the White House on Tuesday to discuss his agenda for the remainder of the year, as he looks to ensure...

Biden convening congressional leaders to discuss legislative priorities -White House
Biden convening congressional leaders to discuss legislative priorities -White House
  • US
  • 2022-11-29 14:36:23Z

WASHINGTON (Reuters) -U.S. President Joe Biden is convening congressional leaders on Tuesday to discuss legislative priorities through the end of the year...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Business