Bloomberg | Bloomberg | Getty Images A group of some of the world’s most powerful oil producers agreed on Monday to a small output cut from next month, surprising energy markets at a time of significant turmoil. OPEC and non-OPEC partners, an influential energy alliance known as OPEC+, have decided to cut production targets by about 100,000 barrels a day starting in October. Energy analysts generally expected the group to maintain its course with its production policy. Last month, OPEC+ agreed to increase oil production by just 100,000 barrels per day. The slight boost was widely interpreted as a repudiation of US President Joe Biden after he visited Saudi Arabia to ask the OPEC kingpin to pump more to lower prices and help the global economy. OPEC+ said in a statement that Monday’s decision to return to August production levels was because the upward adjustment “was only intended for the month of September.” The next OPEC+ meeting is scheduled for October 5. Oil prices moved sharply upwards on Monday. International Brent crude futures were up 3.9 percent at $96.63 a barrel by about 1:45 p.m. London time, while US West Texas Intermediate futures rose 3.6% to $90 a barrel. Oil prices have fallen about 25% since early June after hitting multi-year highs in March. The decline has been fueled by growing concerns that interest rate hikes and Covid-related restrictions in parts of China could slow global economic growth and curb oil demand. Monday’s announcement by OPEC+ comes amid a bitter and escalating energy dispute between Russia and the West, with many in Europe deeply concerned about the prospect of a recession and winter gas shortages. Meanwhile, market participants are closely watching the prospect of increased supply from Iranian crude if Tehran can secure a renewed version of the 2015 nuclear deal.
G-7 supports price cap on Russian oil
European gas prices jumped more than 25% on Monday after Russian state energy giant Gazprom said it would not reopen its main natural gas pipeline to Europe. Gazprom said the indefinite shutdown was due to an oil leak in a turbine. The Nord Stream 1 pipeline, which connects Russia to Germany via the Baltic Sec, was scheduled to reopen on Saturday after three days of maintenance work. The Kremlin’s cutoff of European gas flows followed a joint statement by the Group of Seven economic powers backing a plan to implement a price cap mechanism on Russian oil exports. The OPEC+ announcement comes amid a bitter energy dispute between Russia and the West. Asaad Niazi | Afp | Getty Images The G-7 initiative is designed to exhaust Russian President Vladimir Putin’s ability to finance the war in Ukraine. Russia has said it will stop selling oil to countries that impose price caps on Russian energy exports. EU policymakers have accused the Kremlin of rigging energy supplies in a bid to sow uncertainty in the 27-nation bloc and boost energy prices amid the Kremlin’s offensive against Ukraine. Moscow denies any responsibility for the shutdown of Nord Stream 1.
