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OPEC oil cut strikes a raw nerve in Washington

By Chen Weihua in Brussels | China Daily | Updated: 2022-10-07 07:15

An OPEC flag is seen on the day of OPEC+ meeting in Vienna, Austria, on Oct 5, 2022. [Photo/Agencies]

The US reacted angrily to the OPEC+ decision on Wednesday to make its sharpest cuts to oil production in two years despite pressure from Washington to increase production, especially during the sensitive period as midterm elections approach.

After its first in-person meeting in Vienna on Wednesday, OPEC+ — which includes the Organization of the Petroleum Exporting Countries and other oil producers such as Russia — said it would cut oil production by 2 million barrels a day starting in November.

The decision was based on "uncertainty that surrounds the global economic and oil market outlooks", OPEC+ said.

"The decision is technical, not political," United Arab Emirates Minister of Energy Suhail Mohamed Al Mazrouei told reporters before the meeting.

Oil prices have dropped from $120 a barrel in June to about $90 amid growing fears of a global economic recession, which would also strike the US and European Union, and uncertainty caused by the Russia-Ukraine conflict.

After the OPEC+ announcement, the White House said in a statement that "the president is disappointed by the shortsighted decision by OPEC+".

"At a time when maintaining a global supply of energy is of paramount importance, this decision will have the most negative impact on lower- and middle-income countries that are already reeling from elevated energy prices."

CNN reported that US leaders had mounted a full-scale pressure campaign over the past few days to persuade OPEC members such as Kuwait, Saudi Arabia and the United Arab Emirates to vote against the cuts.

Some of the draft talking points put out by the White House for the Treasury Department on Monday framed the prospect of a production cut as a "total disaster" and warned that it could be taken as a "hostile act".

The OPEC+ decision to go ahead with the cuts anyway was widely seen as humiliating to Washington because it came less than four months after US President Joe Biden made a controversial visit to Saudi Arabia, a country he had vowed just three years earlier to treat as a pariah state.

"I was one of those folks who thought the president's trip to Saudi went pretty well. Today's OPEC decision says I was wrong," US foreign policy expert David Rothkopf wrote in a tweet on Wednesday. "The Saudis have sent a clear message that they just don't care about relations with Biden. Good luck with that."

In response to the OPEC+ decision, the White House said the US Department of Energy will release 10 million barrels from the US strategic petroleum reserve in November to "protect American consumers and promote energy security".

High inflation and soaring energy prices are touchy issues for the general public a month ahead of the US midterm elections, particularly as many suspect that Biden's Democratic Party might lose the House of Representatives, the Senate or even both.

The OPEC+ decision came just a day after EU energy ministers agreed on a price cap on Russian oil.

"The OPEC decision shows that an EU oil price cap won't work because energy markets are global and prices are set by supply and demand," Yan Qin, an energy market analyst at Refinitiv, told China Daily.

Analysts think the oil supply will face more cutbacks in the coming months, when the EU's ban on most Russian oil imports begins in December.

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