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In a move anticipated to push prices globally, some major oil-producing nations have decided to reduce the quantity of oil they export.
Saudi Arabia and Russia are part of the Opec+ group, which said that it would reduce output by two million barrels per day.
The organization claimed it wished to stabilize prices, which have decreased recently as the global economy has slowed.
However, the decision sparked worries that gas prices might increase.
Oil prices have already increased this week due to expectations that nations may reduce their pumping. On Wednesday, the cost of a barrel of Brent crude increased by about 2% to over $93 per barrel.
According to a RAC spokeswoman, the cut announced on Wednesday will “inevitably” result in higher oil prices, driving up the wholesale price of petrol.
The Organization of Petroleum Exporting Countries (Opec) and its allies have announced a drop, the largest since the pandemic’s peak in 2020.
It happens despite calls from the US and others to pump more after prices soared this spring as a result of supply disruptions caused by the conflict in Ukraine.
US President Joe Biden was “disappointed by the short-sighted choice,” according to a statement from the White House.
The action is also likely to scuttle US-led efforts to control the price of Russian gas, an initiative the US had proposed as a measure to restrict money entering the nation and being used for military purposes.
Opec members defended their choice as a reaction to major “uncertainty” about oil demand in the future amid worries that a worldwide recession is imminent.
The most recent OPEC+ decision has implications for geopolitics as well as oil prices.
Three months after President Joe Biden’s contentious trip to Saudi Arabia to persuade the country’s de facto ruler, Crown Prince Mohammed Bin Salman, to pump additional barrels to lower prices, the Saudi-led cartel’s decision to do so is a major setback for the White House.
The action runs the risk of driving up oil prices and jeopardizes Western efforts to limit Russian oil revenues used to fund its conflict in Ukraine.
Many nations would interpret this as a blatant sign that big oil producers, particularly Saudi Arabia, are aligning with Russia to manage the oil market in a protective manner.
The OPEC+ oil ministers adopted the plan after a 30-minute discussion, suggesting that the choice received broad support.
Even if this represents a sizable reduction in oil markets, the practical impact on world supplies would be less because numerous OPEC+ members currently pump much below their designated limits.
But it’s possible it won’t be enough to reduce the turbulence in the oil markets in the days to come.
The surge in consumer prices that rocked nations all over the world earlier this year, driving inflation rates to heights not seen in decades and escalating political tensions, was largely caused by higher oil prices.
While the costs of many other necessities, like food, have continued to climb, the recent decline has given people some solace.
Late in September, the price of a barrel of Brent Crude was $84.06; this was lower than the springtime high of almost $130.
Read Also: OPEC agrees to produce slightly more oil
Regardless of declining oil prices and worries about the world economy, It was an unusual time to reduce supplies, according to Capital Economics’ principal commodities analyst Caroline Bain.
Since several nations were already producing less than they had promised, analysts said the impact of the reduction is likely to be less significant than its size may suggest. Nevertheless, capital predicted a 1% decline in world supplies as a result.