OPEC+ tries to keep oil above US$90 with large production cut
BNN Bloomberg
OPEC+ agreed to cut its collective output limit by 2 million barrels day, stoking tensions with the U.S. as the cartel seeks to halt a slide in oil prices caused by the weakening global economy.
It’s the biggest reduction by the Organization of Petroleum Exporting Countries and its allies since 2020, but will have a smaller impact on global supply than the headline number suggests. Several member countries are already pumping well below their quotas, meaning they would already be in compliance with their new limits without having to reduce production.
Even so, the decision risks adding another shock to a global economy that is already battling inflation driven by high energy costs. The cartel extended its cooperation agreement until the end of 2023, and the new production limits agreed on Wednesday will remain in place until then unless the market changes, said a delegate.
“OPEC wants prices around US$90,” Nigerian Minister of State for Petroleum Resources Timipre Sylva said after the meeting. Many member countries have based their 2023 budgets on that price and “it would destabilize some economies” if that weren’t to happen, he said.
