OPEC and non-OPEC countries decided that they would reduce output by 2 million barrels per day despite pressure from the U.S. and European countries to help keep prices low given the war in Ukraine and the rising specter of inflation all over the world. Expectations were for a cut between 500,000 barrels and 2 million barrels.
However, OPEC+ seems more concerned about oil falling from $120 to $80 per barrel and the prospect of a global recession which would certainly dent demand and lead to even lower prices. It also marked OPEC's first in-person meeting since 2020 when Saudi Arabia decided to increase production in order to punish other OPEC countries who weren't abiding by the reduced quotas.
The decision also led many to criticize President Joe Biden for his visit to Saudi Arabia, where many believed that he was advocating for increased production. However, Biden said that the visit was more about international relations, Mideast peace, and issues related to Israel.
The White House said that it was disappointed in OPEC's decision and considers it short-sighted. Currently, the Biden Administration is selling oil from the strategic petroleum reserve to help bring down prices while buying futures contracts for oil to help support future production. OPEC Secretary-General Haitham Al Ghais said that the reduction in output was necessary to provide 'security [and] stability to the energy markets'.
This was the first cut in production since the pandemic began in 2020 when OPEC+ reduced its output by 10 million barrels per day as demand cratered. OPEC is looking to support oil prices especially as demand has weakened in Asia, and recession risk is steadily climbing.
Following the news, oil prices were up about 1% to $88 for West Texas Intermediate
