OPEC+ Agrees to Biggest Oil Production Cut Since Start of Pandemic

VIENNA—The Organization of the Petroleum Exporting Countries and its Russia-led allies agreed on Wednesday to slash output by two million barrels of oil a day, delegates said, a move likely to push up already-high global energy prices and help oil-exporting Russia pay for its?war in Ukraine.

The decision could undermine a plan by the Group of Seven wealthy nations?to cap the price of Russian oil?on the global market as part of the West’s economic battle with Moscow. It came less than three months after President Biden visited Saudi Arabia, the OPEC’s de facto leader, in a bid to repair relations between the world’s biggest oil consumer and its biggest crude-oil exporter during a period of rising inflation driven in part by high energy prices.

Mr. Biden was “disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine,” the White House said. The president directed the release of 10 million barrels of oil from the U.S.’s Strategic Petroleum Reserve, the White House said.

High gasoline prices helped drive down Mr. Biden’s poll numbers earlier this year, and though prices decreased over the summer, OPEC’s move could spell more pain at the pump for American motorists just before the?midterm elections next month.

The oil-production cut is the biggest from the group collectively known as OPEC+ since April 2020, signaling its intent to keep prices high after enduring seven years of a relatively subdued market, oil-industry analysts said.

After surging above $100 a barrel in the first six months of the year over Russia’s invasion of Ukraine, oil prices had fallen 32% over the past four months on?global economic worries, with international benchmark Brent crude dropping below $83 a barrel for the first time since January. Brent rose more than 2% to $93.90 on Wednesday, after having risen steadily on expectations of a production cut in recent days.

The OPEC+ decision came against a backdrop of slowing economic growth globally. On Wednesday, the World Trade Organization said?global trade in goods?is set to slow sharply next year, possibly easing high inflation but raising the risk of a recession.

After the meeting, OPEC+ members framed any decision coming out of the meeting as a technical response to a flagging global economy,?especially in China, where Covid-19 restrictions have hurt oil demand.

The Saudi energy minister,

Prince Abdulaziz bin Salman,

rejected the implication that the production cut would hurt the U.S. relationship and said the decision was based on projections showing oil demand waning with economic growth.

“Tell me where is the act of belligerence,” he said in response to a question about the U.S., in a news conference at OPEC’s headquarters in Vienna. “We shall act and react to what is happening to the global economy in the most responsible and responsive way.”

Prince Abdulaziz

cut off reporters who tried to ask about the White House statement, saying he would only discuss “oil policy and energy policy and technicalities. This is way above our pay grade.”

But analysts said, and in private OPEC+ delegates agreed, that the move would be?a big win for Russia, which has lost about a million barrels a day of oil production since the beginning of the war in February. On Dec. 5, Russia faces the prospect of a European Union oil embargo and the?G-7 price cap, which threaten to further cut into its sales.

The OPEC+ production cut will limit Russia’s loss of market share, said delegates, who acknowledged it represented an unprecedented effort by the world’s biggest oil producers to collectively help Russia with the?political and economic problems?caused by the war in Ukraine.

Still, participants said their interests would be well served by the decision by boosting the revenue their petrostates need.

Two million barrels of oil amounts to about 2% of the world’s daily oil production, though the effect on the day-to-day world of oil sales could be far less. OPEC+ cut its output targets from 43.8 million barrels a day to 41.8 million barrels a day, but the group?has been undershooting its targets?by as much as three million barrels a day this year.

“The actual hit to oil supply will be much smaller,” said Capital Economics in a note, predicting that Brent crude prices will end the year at $100 a barrel.

OPEC+ delegates said the cut would amount to about 600,000 barrels a day less than what producers are actually pumping now. Energy Aspects, a London research consulting firm, said it could amount to a cut of about a million barrels from the group’s daily output, an estimate the Saudi energy minister also gave.

“If we have to do more, we will do more,” said

Suhail Al Mazrouei,

the energy minister of the United Arab Emirates.

OPEC+ produces more than half of the world’s oil. Its two biggest producers, Russia and Saudi Arabia, have grown closer in recent years through OPEC+, an alliance that has shown its geostrategic significance in the past year.

The deal sealed Wednesday underscores how Russia’s oil industry?has managed to stave off collapse?as the U.S. and Europe batter the country with economic sanctions. Moscow has managed to redirect oil sales that once went to the West to India and China, though at a steep discount.

White House national-security spokesman John Kirby played down the new OPEC+ agreement, pointing to the group’s underproduction. “So in some ways, this announced decrease really just kind of gets them back into more aligned with the actual production,” he said.

—Michael Amon and Tarini Parti contributed to this article.

Write to?Benoit Faucon at?[email protected]?and Summer Said at?[email protected]

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