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Oil Rises as OPEC+ Agrees Deep Cuts to Production

Published: October 6, 2022
Saudi Arabia's Minister of Energy Prince Abdulaziz Bin Salman Al-Saud is seen giving remarks to OPEC+ members in Vienna, Austria on October 5, 2022. (Image: Screenshot via Reuters)

Oil prices rose on Wednesday, Oct 5 — building on gains in recent days as OPEC+ agreed its deepest cuts to production since the 2020 COVID pandemic, despite a tight market and opposition to cuts from the United States and others.The 2 million-barrel-per-day (bpd) cut from OPEC+ could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

Oil had been rising this week in anticipation of the cuts, said Fiona Cincotta, senior financial markets analyst at City Index. “The real impact of a large cut would be smaller, given that some of the members are failing to reach their output quotas,” Cincotta added.

In August, OPEC+ missed its production target by 3.58 million bpd as several countries were already pumping well below their existing quotas. “We believe new output targets will mostly be shouldered by core Middle East countries, led by Saudi Arabia, the UAE and Kuwait,” said Rystad Energy’s analyst Jorge Leon.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Wednesday that Russia may cut oil production in order to offset negative effects from price caps imposed by the West over Moscow’s actions in Ukraine.

The United States was pressing OPEC+ producers to avoid making deep cuts, a source familiar with the matter told Reuters, as President Joe Biden looks to prevent a rise in U.S. gasoline prices ahead of midterm congressional elections on Nov. 8

By Reuters. (Production: Ayhan Uyanik, Hung Trinh)VIEW LESS