OPEC sides with Russia in oil squeeze

The decision to reduce oil production by two million barrels a day will drive up prices and increase pain for Western nations that are already struggling with skyrocketing inflation.

In Vienna, ministers from the OPEC cartel and a group of 10 exporters led by Russia agreed to reduce production by two million barrels a day from November.

The agreement was a slap in the face to US President Joe Biden, whose administration had led a frantic diplomatic mission to convince OPEC+ members to vote against the production cut.

A White House official said President Biden was “disappointed by the shortsighted decision” and his administration would “consult Congress on additional tools and authorities to reduce OPEC’s control over energy prices”.

Mr Biden’s political opponents piled on with criticism. “Total failure. OPEC is laughing at him,” House of Representatives Minority Whip Steve Scalise wrote on social media.

Oil prices immediately climbed as news broke of the decision and a stock market rally slowed.

The move by OPEC — which includes major oil producing nations like Iran, Iraq, Kuwait, Saudi Arabia — is the biggest cut since 2020 and came despite concerns it could fuel inflation and push central banks to hike interest rates.

Oil prices had slid in recent weeks back to the levels before the war in Ukraine on concerns of a global slowdown, but have surged in recent days on expectations of the production cut.

The main international crude contract, Brent, jumped two per cent following the decision before finishing at US$93.37 a barrel, up 1.7 per cent.

“Oil futures are expected to continue their rally in the short and medium term, but continued concerns over a global recession and rising inflation are likely to limit the long-term upside,” said Srijan Katyal of the international brokerage ADSS.

Swissquote analyst Ipek Ozkardeskaya warned that the big cut could “backfire” on OPEC+ if investors fear it will push inflation higher and force central banks to hike interest rates so much that it triggers a recession.

“The higher the energy prices, the sharper the central banks must kill demand to pull the prices lower,” she said before the decision was announced.

Saudi prince snaps at journalist

At a press conference following the decision, Saudi Minister of Energy Prince Abdulaziz bin Salman al-Saud snapped at Reuters reporter Alex Lawler and refused to answer questions.

In a clip widely shared on social media, he accused the news agency of relying on anonymous sources rather than an official spokesman.

“You have got it wrong twice,” Prince Abdulaziz said, in reference to an article involving Saudi Arabia and Russia targeting a US$100 price for oil.

“You [Reuters] did not do a proper job,” he said, adding he had spent time speaking with a journalist to clarify the story.

“If you have questions, direct it to others, but not me,” Prince Abdulaziz said.

“I’m not talking to Reuters, until you respect the source, which is the energy minister, on behalf of the Saudi government.”

Russia warns it will ‘not supply oil’

Meanwhile, Russia warned Wednesday that a potential price cap on Russian oil — proposed by the European Union as part of new sanctions over Ukraine — would have a “detrimental effect” on global markets.

“Such a tool disrupts all market mechanisms and can have a very detrimental effect on the global oil industry,” deputy prime minister Alexander Novak told Russian state television.

Mr Novak said Russian companies would “not supply oil to those countries” that introduce such a cap.

– with AFP