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OPEC+ considers output-limit cut of 2 million barrels a day

An armed police officer patrols outside the OPEC Secretariat building ahead of the 33rd meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries in Vienna, Austria, on Wednesday, Oct. 5, 2022. OPEC+ is considering its biggest production cut since 2020 as it tries to stabilize oil prices, a move that risks cranking up tensions with Washington. Photographer: Akos Stiller/Bloomberg (Bloomberg)Premium
An armed police officer patrols outside the OPEC Secretariat building ahead of the 33rd meeting of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries in Vienna, Austria, on Wednesday, Oct. 5, 2022. OPEC+ is considering its biggest production cut since 2020 as it tries to stabilize oil prices, a move that risks cranking up tensions with Washington. Photographer: Akos Stiller/Bloomberg (Bloomberg)

OPEC+ was earlier believed to have been considering its biggest production cut since 2020, a move Washington is trying to head off with furious diplomatic efforts.

OPEC+ is considering its biggest production cut since 2020, a move Washington is trying to head off with furious diplomatic efforts.

The group is set to discuss a cut to its output limits of as much as 2 million barrels a day, using current targets as a starting point. While a significant move, the actual impact on global supply would be smaller because several countries are already pumping below their quotas.

US officials are making calls to counterparts in the Gulf trying to push back against the move, according to people familiar with the situation.

OPEC+ is also considering smaller reductions of 1 million to 1.5 million barrels a day, delegates said. Even a cut on that scale would be a blow to a global economy that is already suffering historic inflation shocks. Washington is looking at potential responses, as President Joe Biden tries to tame pump prices ahead of mid-term elections in November.

“It is hard to overstate how anxious the Biden administration is about a potential resurgence in oil prices," Bob McNally, founder of Rapidan Energy, said in Vienna. “A large OPEC+ cut would antagonize the White House, though officials may wait to see how prices respond afterward before pulling the trigger on policy responses."

It’s a particular blow for Biden after his visit to Saudi Arabia earlier this year in search of a new oil deal. And it underscores the strains in the US-Saudi relationship, set against the enduring strength of the kingdom’s ties with Moscow despite the war. Russia’s Deputy Prime Minister Alexander Novak is due to attend the meeting in Austria, adding to the diplomatic angst.

In Vienna, there was little sign the US pressure was working. United Arab Emirates Energy Minister Suhail Al Mazrouei insisted the decision was “technical."

“It’s very important that it remains as a technical decision and it’s not political," he told reporters. “That’s why it’s important to look at technical side of the equation and look at any concerns regarding the economy and the status of the economy."

US Response

Already, White House officials have asked the US Energy Department to analyze whether a ban on exports of gasoline, diesel and other refined petroleum products would lower prices, Bloomberg reported on Tuesday. It’s a controversial idea but one that’s gaining traction in some corners of the Biden administration.

As OPEC+ ministers meet in Vienna, European and US leaders are working to curb the revenues that Moscow receives from oil to try to weaken President Vladimir Putin’s war machine. The EU is set to approve a new sanctions package that will severely curtail Russia’s ability to sell crude, while the US is working with allies to implement a price cap on Russian oil.

Oil futures, which jumped on Tuesday as the scale of the cuts being discussed emerged, eased 0.5% on Wednesday.

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