OPEC+ cuts oil production at top of analysts' expectations, is energy trading back?

OPEC+ coalition announced a 2 million barrels per day cut in oil production on Wednesday.

The cut could reverse weeks of falling oil and gas prices, Reuters says, despite US lobbying to keep current quotas.

The United States promised to buy 200 million barrels from OPEC members to replenish its strategic oil reserve.

See also: Russian gas company Gazprom resumes gas supplies to Italy via Austria

The conference of 24 OPEC+ oil-producing nations, including Russia, comes as much of the world is already grappling with soaring energy prices .

A supply cut would also strengthen the already strained relationship between the United States and Saudi Arabia, where President Joe Biden has tried to control gas prices ahead of the elections in half term.

OPEC+, formed in 2016, includes the 13 members of the Organization of the Petroleum Exporting Countries and 11 other non-OPEC members.

It is unclear to what extent the reduction in supply would lead to higher prices, however, Tuesday's oil price increase was due to the announcement of the proposed cut production.

The action is seen as an attempt by the coalition to support prices, which had climbed as high as $120 a barrel earlier in the year but have begun to decline due to fears of lower growth in the global economy. WTI Crude Oil rose half a percentage point on Wednesday, trading above $86 a barrel.

The group last cut oil production in May 2020, during a period of a sharp drop in demand caused by the early stages of the Covid-19 pandemic.

He has gradually increased his production since then. OPEC changed course and took 100,000 barrels off the market last month in a bid to lower prices. That's one-twentieth of Wednesday's OPEC+ announcement.

This action could be interpreted as criticism of Biden, who failed to convince Saudi Arabia to increase production over the summer.See also: UN Says The Fed can stop the global recession, but it must

The sharp decline in oil production could also benefit loose OPEC+ member Russia. Energy profits, which are increasingly crucial to its "special military operation" in Ukraine, underpin its economy. Russian production has not decreased significantly despite sanctions.

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.