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Oil producer group OPEC+ surprises energy markets with a little production cut

The OPEC logo on an indicator at the group’s headquarters in Vienna, Austria.

Bloomberg | Bloomberg | Getty Images

Several a few of the world’s most effective oil producers on Monday decided on a little output cut from the following month, surprising energy markets at the same time of considerable turmoil.

OPEC and non-OPEC partners, an influential energy alliance referred to as OPEC+, made a decision to cut production targets by about 100,000 barrels each day from October.

Energy analysts had broadly expected the group to remain the course using its production policy.

Last month, OPEC+ agreed to improve oil output by simply 100,000 barrels each day. The minuscule boost was widely interpreted as a rebuff to U.S. President Joe Biden after his stop by at Saudi Arabia to ask the OPEC kingpin to pump more to cool prices and help the global economy.

“The President has had action including historic release of oil from U.S. and global strategic reserves and dealing with allies on a cost cap on Russian oil to make sure we maintain a worldwide way to obtain oil, once we punish Putin for his action,” said White House Press Secretary Karine Jean-Pierre.

OPEC+ said in a statement that Monday’s decision to revert back again to August degrees of production was as the upward adjustment was “intended limited to the month of September.”

Another OPEC+ meeting is scheduled for Oct. 5.

Oil prices traded sharply higher but were off the day’s highs on Monday afternoon. International benchmark Brent crude futures were up 2.5% at $95.54 a barrel at around 1 p.m. ET, whileU.S. West Texas Intermediate futures were up 2.6% at $89.16 a barrel.

Oil prices have fallen around 25% since early June after touching multiyear highs in March. The decline has been fueled by growing concerns that interest hikes and Covid-related restrictions in elements of China could slow global economic growth and curtail oil demand.

Monday’s announcement from OPEC+ comes amid a bitter and escalating energy dispute between Russia and the West, with many in Europe deeply worried about the chance of recession and a winter gas shortage.

Meanwhile, market participants are closely monitoring the chance of a supply boost from Iranian crude if Tehran can secure a renewed version of the 2015 nuclear deal.

G-7 backs price cap on Russian oil

European gas prices jumped a lot more than 25% on Monday after Russia’s state-owned energy giant Gazprom announced it could not reopen its main gas pipeline to Europe.

Gazprom said the indefinite shutdown was because of an oil leak in a turbine. The Nord Stream 1 pipeline, which connects Russia to Germany via the Baltic Sec, have been scheduled to reopen on Saturday after three days of maintenance work.

The Kremlin’s halt to European gas flows followed a joint statement from the Band of Seven economic powers backing an idea to implement a price-capping mechanism on Russian oil exports.

The OPEC+ announcement comes amid a bitter energy dispute between Russia and the West.

Asaad Niazi | Afp | Getty Images

The G-7 initiative is made to deplete Russian President Vladimir Putin’s capability to fund the war in Ukraine. Russia has said it’ll stop selling oil to countries that impose price caps on Russian energy exports.

EU policymakers have accused the Kremlin of weaponizing energy supplies in a bid to sow uncertainty over the 27-nation bloc and boost energy prices amid the Kremlin’s onslaught against Ukraine.

Moscow denies any blame on the Nord Stream 1 shutdown.

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