Washington, October 6 / BNA / Oil prices stabilized near their highest levels in three weeks after the Organization of the Petroleum Exporting Countries (OPEC) agreed to further tighten global crude supply with an agreement to reduce production by about two million barrels per day, which is the largest. The reduction since 2020.
Brent crude futures for December settlement fell 8 cents to $93.29 a barrel by 0656 GMT, after settling up 1.7% in the previous session, Reuters reported.
US West Texas Intermediate (WTI) crude futures for November delivery fell 15 cents to $87.61 a barrel, based on a 1.4% rise on Tuesday.
The agreement between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, comes ahead of the European Union’s ban on Russian oil and will reduce supplies in an already tight market, adding to inflation.
“This latest action by OPEC+ suggests that there is a positive side to our full-year 2023 outlook at $97 per barrel,” Internationale Nederlanden Groep (ING) analysts said in a note.
However, given that production in some OPEC + countries is below target levels, the actual reduction will be less than the 2 million barrels per day reduction agreed at the meeting.
Saudi Energy Minister Abdulaziz bin Salman said that the real supply cut will be from one million to 1.1 million barrels per day, and that this came in response to high interest rates in the West and the weakness of the global economy.
The administration of US President Joe Biden criticized the deal, describing it as short-sighted. The White House said Biden would continue to assess whether to release more strategic oil stocks to bring prices down.
The White House said it would consult with Congress on additional paths to reduce the control of OPEC and its allies over energy prices, an apparent reference to legislation that could expose the group’s members to antitrust lawsuits.
Citi analysts said in a note that the final impact on the market will depend on the duration of the agreement as OPEC+ decided to extend the declaration of cooperation until the end of 2023, adding that supply cuts would keep global stocks low for a longer period and tighten markets in 2023.
Analysts at RBC Capital said more than half of the 1 million basis point cut was expected to come from Saudi Arabia, the world’s largest exporter.
The withdrawal of US oil inventories last week also supported prices. The Energy Information Administration said crude stocks fell by 1.4 million barrels in the week to September 30, to 429.2 million barrels.
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