Crude futures gain on OPEC+ output cut

Front-month ICE Brent has increased by $1.86/bbl on the day, to $93.32/bbl at 09.00 GMT.

PHOTO: OPEC+ will cut production by 2 million b/d from November. Getty Images

Upward pressure:

OPEC and allies (OPEC+) has agreed to slash its joint production quota by 2 million b/d from August levels. The production cuts will start from November and OPEC+ will next meet in December.

The group has said that the decision to cut production was made "in light of the uncertain global economic and oil market outlooks." It hopes it will lift Brent futures that had dropped to $85/bbl last month, and counter fears that a global recession will dampen oil demand.

Downward pressure:

OPEC+'s decision to cut production has been called "shortsighted" by the White House, which has said President Joe Biden is "disappointed" by the agreement.

The Biden administration said it will continue to release Strategic Petroleum Reserves (SPR) and discuss strategies "to reduce OPEC's control of energy prices".

It will release 10 million SPR barrels to the market next month to “promote energy security.” Back in March, Biden authorised the US Department of Energy to release 180 million in a historic SPR drawdown. 165 million of these bbls had been released by September.

Energy Security Analysis president Sarah Emerson calls the SPR drawdown the “single most important factor” in lowering oil and gas prices over the last three months.

By Konica Bhatt

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