Opec-Plus Stuns Consumers With Massive Cut

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Citing massive market uncertainty and a need to be “proactive and pre-emptive,” Opec-plus has announced a 2 million barrel per day cut from August quota levels. The cut, the largest since the producer alliance’s historic 9.7 million b/d Covid-19 supply response in 2020, exceeded pre-meeting talk of a 1 million-1.5 million b/d cut. Brent's relatively muted price response to the decision — the benchmark gained about $2 to around $94 per barrel — indicates that producers’ demand fears have at least some validity, although oil prices have been rising since word of the big cut first surfaced last week. But the bold move could mark a watershed moment in producer-consumer relations, with the news triggering fury from the White House, which is desperate to keep inflation in check ahead of midterm elections in November and deny Russia a potential revenue tonic from high oil prices. Delegates in Vienna argued that rather than a bid to shore up prices, the decision was driven by a desire to reassert market control by freeing up spare capacity. Saudi Energy Minister Prince Abdulaziz bin Salman rejected any suggestion the move represented a weaponization of energy. “Show me where is the act of belligerence,” he said. He noted that prices of numerous commodities, including coal, aluminum and even baby formula, have seen far greater recent increases than those for crude. But many analysts foresee substantial declines in Opec-plus member Russia's production in the coming months amid tightening Western sanctions and a G7 price cap, which left Opec-plus facing accusations that it was throwing a lifeline to Moscow and endangering a global economy on the cusp of recession.

Topics:
Opec-Plus Supply, Opec/Opec-Plus, Oil Supply, Oil Demand, Sanctions, Ukraine Crisis
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