OPEC+ reached an internal agreement to prolong its oil production cuts, a move that could raise energy prices in the U.S. ahead of the pivotal 2024 elections, Reuters reported Monday.
The oil cartel, made up of mostly Middle Eastern nations and other oil-producing states — is prolonging existing production cuts of 3.66 million barrels per day through the end of 2025 and extending its ongoing cuts of 2.2 million barrels per day through September 2024, according to Reuters. The cartel’s deal to extend the cuts could mean that oil prices will remain high through this fall’s presidential election, according to The Wall Street Journal.
OPEC and its allies are presently reducing their production by about 5.8 million barrels per day, a volume that amounts to about 5.7% of the world’s demand, according to Reuters. The oil-producing cartel’s decision to extend cuts could put the global market into a supply deficit, conditions that would likely increase prices.
Karine Jean-Pierre: “The decisions that OPEC+ made just last week, it was, we believe, sided with the Russians.” pic.twitter.com/BRZVj5eByX
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The Biden administration may be concerned about a possible spike in energy costs with the 2024 elections are approaching. The Department of Energy (DOE) recently announced a plan to release 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve to tame prices at the pump while John Podesta — one of the most influential climate advisers in the Biden administration — has floated the possibility of more Strategic Petroleum Reserve (SPR) drawdowns if deemed necessary.
“The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife,” Amrita Sen, the co-founder of an energy-focused think tank called Energy Aspects, told Reuters. “It should be seen as a huge victory of solidarity for the group and [Saudi Arabian Energy Minister Prince Abdulaziz bin Salman Al Saud].”
Members of OPEC include Saudi Arabia, Kuwait, the United Arab Emirates, Libya and Venezuela. Other nations, including Russia, are aligned with OPEC+, but are not full member states. Energy market analysts anticipated that OPEC and its allies would extend the production cuts for several months because prices had been decreasing while demand was not proving to be especially robust, according to Reuters.
Neither the White House nor the DOE responded immediately to requests for comment.
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