Oil near a 3-week high after the OPEC + agreement to cut production

Oil prices stabilized near a three-week high on Thursday after the OPEC + alliance agreed to cut global crude supplies by reducing production by about 2 million barrels per day, the largest cut since 2020.

Brent crude futures for December settlement rose four cents to $93.41 a barrel by 0538 GMT, after rising 1.7 percent in the previous session.

U.S. West Texas Intermediate (WTI) crude futures for November delivery rose two years to $87.78 a barrel, after rising 1.4 percent on Tuesday.

The agreement between the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, an alliance known as OPEC+, comes before the European Union’s ban on Russian oil, and will put pressure on supplies in a market already suffering from a shortage, which will increase inflation.

Given that production in some OPEC + countries is lower than the target levels, the actual reduction will be less than the two million barrels per day that was agreed upon.

Saudi Energy Minister Abdulaziz bin Salman said that the actual supply cut will range between one million and 1.1 million barrels per day, and that the decision comes in light of high-interest rates in the West and the weakness of the global economy.

The administration of US President Joe Biden criticized the agreement, describing it as “short-sighted”. The White House said President Joe Biden will continue to assess whether to withdraw more strategic oil stocks to bring prices down.

The White House added that it would consult Congress on additional paths to reduce OPEC + control of energy prices, in an apparent reference to legislation that could expose group members to antitrust lawsuits.

In a separate context, Russian Deputy Prime Minister Alexander Novak said on Wednesday that Russia may reduce oil production, in an attempt to counter the repercussions of the West’s imposition of a ceiling on Russian energy prices due to the Russian invasion of Ukraine.

The US Energy Information Administration said the drawdown of US oil inventories last week also supported prices. Inventories fell by 1.4 million barrels in the week ending September 30 to 429.2 million barrels.