Oil prices fall after Saudi-backed OPEC+ production cut
Oil prices have risen and fallen over the past two days in response to oil producers announcing a major production cut.
What happened: The price of Crude Brent — considered the global benchmark for oil prices — fell more than 3% on the day to under $93 a barrel as of 2:20 p.m. ET. Yesterday, the price fell from around $94 a barrel to near $97, according to market data.
The price swings followed a decision by the Organization of the Petroleum Exporting Countries (OPEC) and Russia yesterday to cut oil production by 100,000 barrels per day for October. It was a reversal for the so-called OPEC+ alliance, which boosted production throughout the summer amid historically high prices following the Russian invasion of Ukraine.
Why is this important: US President Joe Biden pushed Saudi Arabia – OPEC’s biggest producer – to boost oil production during his July visit to the country in a bid to lower prices in the United States. The kingdom, however, refused to significantly increase production. OPEC+ production increases this year have been relatively modest.
Yesterday’s OPEC+ decision also came as the United States and Iran are said to be set to revive the Iran nuclear deal. Saudi Arabia categorically opposes the deal, which would remove sanctions on Iran’s nuclear program in exchange for curtailing its nuclear program.
Reuters reported that Saudi Arabia wanted a cut in production due to sharp swings in oil prices. In August, the price of Brent fell to around $91.50 a barrel, the lowest price since February.
However, an analyst told Reuters the cut was a “message” to the United States about the Iran deal.
Last month, another analyst wrote in Forbes that Saudi Arabia could cut its oil production in opposition to US overtures to Iran.