Oil cartel joins hands with Russia in bid to cut output by 2m per day

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The global cartel of oil-producing countries, Opec+, has joined hands with Russia after it agreed to slash oil output by two million barrels per day. According to news reports, Saudi Arabia has been accused of joining hands with Russia to maintain a stranglehold on oil exports and prevent prices from falling further.

The Times reported that Opec+ defied US President Joe Biden and agreed to cut output by two million barrels per day, the largest reduction since the height of the pandemic in April 2020, when it cut output by 9.7million

In a statement, the White House said Mr Biden was “disappointed by the short-sighted decision”.

White House press secretary Karine Jean-Pierre said: “It’s clear that Opec+ is aligning with Russia with today’s announcement.”

Expectations that countries were planning to pump less had already pushed oil prices higher this week.

The price of a barrel of Brent crude jumped another almost 2 percent to more than $93 a barrel on Wednesday.

A spokesman for the RAC motoring group said the reduction announced Wednesday would “inevitably” lead to higher oil prices, forcing up the wholesale cost of fuel.

Simon Williams said: “The question is when, and to what extent, retailers choose to pass these increased costs on at their forecourts.”

The cut announced by the Organization of the Petroleum Exporting Countries (OPEC) and its allies marks the biggest reduction by the group since the height of the pandemic in 2020.

It comes despite pleas from the US and others to pump more, after oil prices spiked this spring when the war in Ukraine disrupted supplies.

The US pledged to continue to release oil from national stockpiles “as appropriate” and look at other ways to try to rein in prices at the pump, which are a key issue for American voters in midterm elections scheduled for November.

The move is also likely to disrupt US-led efforts to set a price cap for oil from Russia, a plan the US had suggested as a way to limit money flowing into the country and being put toward military use.

Bill Farren-Price, head of global oil and gas macro research at Enverus, told The Times: “This [production cuts] is clearly a pre-emptive move aimed at stopping oil prices falling further if we head into the depths of recession.

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“Saudi Arabia has sided very clearly with Russia in seeking to tighten oil markets just as European sanctions are about to hit Russian oil exports.

“That will not be received well by Western countries who oppose Russia’s invasion of Ukraine.

“The Saudis always make a big point of trying to disassociate oil policy and oil market management from geopolitics, but they have put themselves right at the heart of geopolitics by making this decision, and they are going to have to bear the consequences of that.”

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