London: The global cartel of oil producers, OPEC, has agreed to cut production by 2 million barrels a day, which will most likely drive up energy prices and help oil-exporting Russia pay for its war in Ukraine.
The move by the 23-member group – which includes Saudi Arabia, Iraq, the United Arab Emirates and Kuwait – also threatens to escalate tensions with the West, with the United States calling the surprise move ” short-sighted”.
OPEC’s de facto leader Saudi Arabia said the cut – the equivalent of 2% of global supply – was needed to respond to rising interest rates in the West and an economy weaker world.
Oil prices remain high by historical standards and, with the likelihood of a major production cut becoming evident, Brent Crude, the international benchmark, hit $91.50 a barrel on Wednesday, up 8 % since last week.
European Union countries had agreed to a US plan hours earlier to impose a price cap on Russian oil exports, joining an effort by Western countries – including Britain, Canada, Japan and Australia – to drive down crude and fuel prices.
Saudi Arabia and other Gulf countries feared that this plan would reduce oil prices at all levels and could even be used against them in the future.
The decision could aggravate an energy supply crisis linked to the war in Ukraine which threatens to generalize power cuts in the European Union this winter. The EU is poised to bolster its resources as temperatures drop and prepares for two scenarios – one in which a few member states suffer power cuts and the other in which blackouts occur in many states members at the same time.
But officials insist they are better prepared for what is to come than at the start of the war in Ukraine, with natural gas storage at almost 90% capacity, 15% more than on the same date last year.
Learn more here.