What many analysts were afraid to speculate about has happened. Countries in the informal OPEC+ grouping have decided to cut oil production by two million barrels a day. This represents about two percent of global production.
Restrictions on oil production
Wednesday’s meeting of representatives of the OPEC+ oil exporting countries agreed to limit production by two million barrels per day. Such a decline was enforced by Saudi Arabia, which is the de facto leader of the whole group.
The OPEC+ group justified the decline in production as a response to the expected slowdown in global economic growth. Russia has been critical of the production cut, as its income from oil exports is crucial.
The agreement was also accepted by the US President
US President Joe Biden also criticised the OPEC+ agreement. According to Reuters, he described it as “short-sighted” as the oil price hike will only exacerbate the energy price shock on the global economy.
OPEC+ has been preparing for a major production cut for some time now, as the price of oil has already managed to rise to $120 this year, but will subsequently fall below $90, which the mining powers understandably do not like.