OPEC+ cuts hit oil prices, US calls shortsighted

VIENNA LONDON:OPEC agreed on steep oil production cuts on Wednesday October 5 that would curb supply in an already tight market, causing one of its biggest clashes with the West, as the US administration called the surprise decision shortsighted.

Saudi Arabia said OPEC's cut of 2 million barrels per day of output was necessary to respond to rising interest rates in the West and a weaker global economy.

The kingdom has rebuffed criticism that it is colluding with Russia to drive prices higher, and said the West was often driven by wealth arrogance when criticising the group.

President Joe Biden would continue to assess whether or not to release more strategic oil stocks to lower prices, according to the White House.

The President is disappointed by the shortsighted decision by OPEC to cut production quotas while the global economy is dealing with the negative impact of Russian President Vladimir Putin's invasion of Ukraine, according to the White House.

Biden faces low approval ratings ahead of mid-term elections due to soaring inflation and has called for Saudi Arabia, a long-term US ally, to help lower prices.

US officials say part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue. Biden travelled to Riyadh this year but didn't secure any firm cooperation commitments on energy. Relations have been further strained as Saudi Arabia has not condemned Moscow's actions in Ukraine.

Oil prices fell to around US $90 from US $120 three months ago on fears of a global economic recession, rising US interest rates and a stronger dollar, according to a cut in oil supplies in Vienna on Wednesday.

Saudi Energy Minister Abdulaziz bin Salman said OPEC had to be proactive as central banks around the world moved to tackle soaring inflation with higher interest rates.

The production cuts of 2 million barrels per day were based on existing baseline figures, which means the cuts would be less deep because OPEC fell about 3.6 million barrels per day short of its output target in August.

Under-production happened because of Western sanctions on countries such as Russia, Venezuela and Iran and production problems with producers such as Nigeria and Angola.

Prince Abdulaziz said the real cuts would be 1.0 -- 1.1 million barrels per day.

Analysts from Jefferies said the figure was 0.9 million barrels per day, while Goldman Sachs put it at 0.4 0.6 million barrels per day, mainly from Gulf OPEC producers such as Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

On Wednesday, the price of crude rose above US $93 per barrel.

The West accused Russia of weaponizing energy, with soaring gas prices and a scramble to find alternatives to create a crisis in Europe that could cause gas and power rationing this winter.

Moscow accuses the West of weaponising the dollar and financial systems such as the international payments mechanism SWIFT in retaliation for Russia sending troops into Ukraine in February.

Russian Deputy Prime Minister Alexander Novak, who was put on the US special designated nationals sanctions list last week, travelled to Vienna to participate in meetings.

Novak is not under EU sanctions. He and other members of OPEC agreed to extend the cooperation deal with OPEC by another year to the end of 2023.

The next OPEC meeting will take place on December 4th. The OPEC will move to meeting every six months instead of monthly meetings.