The OPEC+ alliance announced on Wednesday it would cut oil production by 2 million barrels a day, a move that could lift gas prices after a year of turmoil at the pump.
In its statement announcing the cuts, the OPEC+ alliance cited “uncertainty surrounding the outlook for the global economy and the oil market.” This is the largest drop in production since the start of the pandemic.
In a statement, the Biden administration said it was disappointed with the move, calling it “short-sighted” given global energy prices, which have already risen following the invasion of Ukraine by Russia.
“At a time when maintaining global energy supply is paramount, this development will have the most negative impact on low- and middle-income countries already affected by high energy prices,” he said.
The move by the oil cartel and its allies announced in Vienna comes after oil and gas prices soared this summer amid Russia’s invasion of Ukraine. Prices tended to fall from July through mid-September as President Joe Biden sought to cut gas prices and strain Americans’ wallets ahead of the midterm elections.
Research group Capital Economics now expects global oil prices to rise from around $93 to $100 a barrel, with US benchmark prices rising from $88 to $92. By the time Russia invaded Ukraine, world oil prices had reached $128.
We still expected supply growth to slow later this year and into 2023, but this recent action by OPEC+ has reinforced our view that prices will end the year slightly higher.” said Caroline Bain, chief commodities analyst at Capital Economics, in a note after Wednesday’s announcement.
Gas prices in the US have risen in recent weeks due to increased demand and problems with US refineries. The average price of a gallon of gas on Wednesday was $ 3.83, the highest since late August.
