Yesterday, a group of major oil-producing countries known as OPEC+ agreed to reduce their collective crude oil production levels by 2 million barrels a day starting next month. This is the biggest cut since the COVID-19 shut down in April 2020.
The cut in production is set to take effect in November. OPEC+ said in a statement that the move was necessary to stabilize the recent fall in global energy prices, yet it comes at a time when much of the world is already battling soaring costs.
The move is seen as a bid by Saudi Arabia, the group’s most powerful member, to prop up prices. Right now, the international benchmark Brent crude is hovering around $93, but the price shot up above $120 a barrel during the spring — the early part of the war in Ukraine. Prices of oil have recently plunged to about $81 as concerns about a slowing global economy grew. It’s said that OPEC+ is tapping into these economic anxieties to justify the production cut.
At this time, it’s unclear how much of a price increase the supply cut would cause. The world consumes up to 100 million barrels of oil a day, so removing 2 million from the market will have a noticeable effect.
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