Fears grow over oil price as Opec+ agrees to bigger than expected output cuts

The Opec oil cartel and its allies have agreed to a bigger than expected cut in oil production targets despite significant pressure from the US.

The Opec+ group of oil-producing nations signed up to a cut in output of 2m barrels a day, surpassing predictions earlier in the week of cuts of 1m to 1.5m barrels, squeezing supplies in a tight market.

Joe Biden’s administration had hoped to persuade Middle Eastern nations not to curb supplies, which could further stoke fuel prices and add to soaring inflation.

Oil prices have fallen from the highs of about $130 a barrel seen in the summer when Russia’s invasion of Ukraine tightened supplies.

Motorists in the UK and the US have experienced high prices at the pump as a result, exacerbating the cost of living crisis.

OPEC+has in recent months failed to achieve its planned output increases due to underinvestment in oilfields by some Opec members and by losses in Russian output.

The invasion of Ukraine has upended world oil markets with western nations shunning Russian oil and exporters in Russia instead increasingly shipping to India and China.

If oil prices rise sharply, the White House could opt to release additional barrels from the US Strategic Petroleum Reserve, or curb domestic exports of refined products, to calm prices. However, the White House has indicated that a decision to tap the reserve is not imminent.

The Opec+ meeting is taking place in person in Vienna for the first time since March 2020, when the Covid pandemic forced it online, after a last-minute switch.

Oil use has rebounded from the lows of the pandemic, although high prices and Chinese coronavirus outbreaks have hit 2022 growth projections.

More details soon …


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