OPEC+ to cut oil output ahead of winter, Europe and Asia fear higher inflation

Fueling further concerns of increased inflation this winter, the OPEC+ bloc has announced its largest-ever supply cut since 2020 as the EU sanctions Russian oil and gas.

This move has increased tensions between the West and the Saudi-led bloc, as they are concerned about higher energy prices will hurt the already struggling global economy and such a move will undermine the West’s efforts in depriving Russia of energy sales revenues.

After the Organization of the Petroleum Exporting Countries and their allies, including Russia, agreed on Wednesday to slash output by 2 million barrels per day just ahead of the busy winter season, global crude futures spiked this week, rebounding to three-week highs.

According to industry participants, this is likely to increase spot prices, especially for Middle Eastern oil, which satisfies about two-thirds of Asia’s demand. This will raise inflation concerns as governments from Japan to India battle rising living expenses and as Europe burns more oil than usual this winter to replace Russian gas.

Saudi Energy Minister Abdulaziz bin Salman said the real supply cut would be about 1 million to 1.1 million bpd, a response to rising global interest rates and a weakening world economy.

That move triggered a sharp response from Washington, which criticised the OPEC+ deal as shortsighted. The White House said President Joe Biden would continue to assess whether to release further strategic oil stocks to lower prices.