(The Hill) – The Organization of the Petroleum Exporting Countries (OPEC) and its oil-exporting allies announced a 2-million-barrel-per-day cut in oil production Wednesday, bucking months of pressure from Washington to increase production and potentially spiking gas prices again.
The coalition, which includes the 13 OPEC nations and 11 non-members including Russia, made the announcement at its Vienna meeting, the first in-person summit since the beginning of the COVID-19 pandemic. The announced cut is roughly equivalent to 2% of global supplies.
In July, President Joe Biden visited Saudi Arabia to directly appeal to its leaders to increase oil production, despite his administration’s frequent criticism of the kingdom’s human rights record. After the meeting, Saudi Arabia announced a production increase, but a significantly smaller one than the U.S. had requested.
The cut announced by OPEC+ is about twice the amount the U.S. has been releasing daily from the strategic petroleum reserve. White House press secretary Karine Jean-Pierre said Tuesday that future strategic petroleum reserve releases have not been discussed.
It’s unclear what direct impact the cut will have on domestic gas prices, but it could prompt an increase weeks before the midterms after the Biden administration had recently touted lower prices. Initial reports increased the price of oil by about $3 a barrel Wednesday morning. Prices have fallen from about $120 a barrel in June to around $80 a barrel amid concerns about a potential global recession.
Meanwhile, an OPEC+ production cut could also benefit Russia by propping up the Kremlin’s own petroleum revenues before European Union sanctions are set to take effect in December.
Rep. Ro Khanna (D-Calif.), a frequent critic of Saudi Arabian leaders, blasted the reported cuts, telling CNN that the U.S. should retaliate by withdrawing weapons sales.
“President Biden should make it clear that we will stop supplying the Saudis with weapons and air parts if they fleece the American people and strengthen Putin by making drastic production cuts,” Khanna said in a statement. “They need us far more than we need them.”
Quincy Krosby, Chief Global Strategist for LPL Financial, noted in a statement that the market had braced for a much larger cut, and that Russia had also sought a bigger decrease, suggesting the announcement was a compromise option.