The move can spur a recovery in oil prices that have dropped to about $90 from $120 three months ago.
OPEC+ has agreed its deepest cuts to oil production since the 2020 COVID pandemic at a Vienna meeting, curbing supply in an already tight market despite pressure from the United States and others to pump more.
Wednesday’s move by the global cartel of oil-producing countries could spur a recovery in oil prices. which have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar.
Al Jazeera’s Dominic Kane, reporting from Berlin, said the effect of the decision is expected to take three weeks to be reflected on the consumer prices.
He also said that “some analysts suggest that the US might seek to free up some of the stocks of oil that it holds to try to counteract what OPEC+ is trying to do”.
The United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals do not support them, a source familiar with the matter told the Reuters news agency.
Sources said it remained unclear if cuts could include additional voluntary reductions by members such as Saudi Arabia, or if they could include existing under-production by the group.
OPEC+ fell about 3.6 million barrels per day short of its output target in August.
“Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of US mid-term elections,” analysts of Citi, the leading global bank, said in a note.
“There could be further political reactions from the US, including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill,” Citi said, referring to a US antitrust bill against OPEC.
JPMorgan investment bank also said it expected Washington to put in place countermeasures by releasing more oil stocks.
Saudi Arabia and other members of OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers including Russia, have said they seek to prevent volatility rather than to target a particular oil price.
Benchmark Brent crude rose towards $93 per barrel on Wednesday, after climbing on Tuesday.
Weaponising energy
The West has accused Russia of weaponising energy, creating a crisis in Europe that could trigger gas and power rationing this winter.
Moscow accuses the West of weaponising the dollar and financial systems, such as SWIFT, in retaliation for Russia sending troops into Ukraine in February.
The West accuses Moscow of invading Ukraine, while Russia calls its actions a special military operation.
Part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue, while Saudi Arabia has not condemned Moscow’s actions.
Relations have been strained between the kingdom and the administration of Biden, who travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy.
“The decision is technical, not political,” United Arab Emirates Minister of Energy Suhail al-Mazroui told reporters ahead of the meeting.
“We will not use it as a political organisation,” he said, adding that concerns about a global recession would be one of the key topics.
Russian Deputy Prime Minister Alexander Novak, who was put on the US special designated nationals sanctions list last week, also travelled to Vienna to participate in meetings. Novak is not under EU sanctions.