OPEC+ announced this week that it will cut oil production by 2 million barrels a day, marking the biggest cut since the beginning of the pandemic. This equates to around 2% of the global oil demand. This move will have a knock-on effect on oil prices and could send gasoline prices even higher. The Brent benchmark increased by 1.5% to over $93 a barrel following the announcement.
President Biden has previously appealed to OPEC+ to increase output in response to rising fuel prices due to shortages following energy sanctions imposed on Russia, as well as difficulties in increasing global crude production to pre-pandemic levels. Biden responded to the most recent move as he departed from the White House “I am concerned, it is unnecessary.”
The oil cuts will begin in November, with another meeting scheduled between OPEC members in December to reassess the situation. The group said the decision was taken “in light of the uncertainty that surrounds the global economic and oil market outlooks.” OPEC+ account for over 40 percent of the world’s oil output. It is hoping to avoid a Covid-esque fiasco in which demand plummeted, pushing countries to stockpile their excess crude.
While production cuts have left many world leaders concerned for their oil supplies, Biden is also worried about the upcoming mid-term elections. Gasoline prices that had been falling over the summer months are now starting to increase again, and they could be pushed up even further by this move. However, Rystad Energy predicts that the global oil market will have an oversupply of crude between now and the end of the year, reducing the impact of OPEC+ cuts.
