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OPEC Moves to Keep High Prices


FILE: A customer pumps gas at an Exxon gas station, in Miami, Florida. Taken 5.10.2022
FILE: A customer pumps gas at an Exxon gas station, in Miami, Florida. Taken 5.10.2022

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.

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.

"An output cut won't make them any friends at a time when the world is facing a cost-of-living crisis already and the group has failed to keep up with demand this year," Craig Erlam, analyst at OANDA trading platform, warned prior to the OPEC+ announcement.

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.

Oil prices rose by more than three percent following the announcement, with the international benchmark, Brent, exceeding $96 per barrel while the US contract, WTI, reached almost $90.

Saudi 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.

He said "volatility and thin liquidity send erroneous signals to markets at times when clarity is most needed".

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.

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