Oil near three-week high after OPEC+ decision to cut production
Oil prices held three-week highs on Thursday after OPEC+ agreed to lower global crude supply with a deal to cut production targets by 2 million barrels per day, the largest reduction since 2020.
The agreement between the Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, a group known collectively as OPEC+, could incite a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.
The US government criticized the deal as "shortsighted" and the White House said President Joe Biden would continue to assess whether to release further strategic oil stocks to lower prices.
US wants to deprive Moscow of oil revenue
U.S. officials have said part of the reason Washington wants lower oil prices is to deprive Moscow of oil revenue. Biden traveled to OPEC’s de facto leader Saudi Arabia this year but failed to secure any firm cooperation commitments on energy. Relations have been further strained as Riyadh has not condemned Moscow's actions in Ukraine.
After the decision, the kingdom rebuffed criticism it was colluding with Russia to drive prices higher and said the West was often driven by "wealth arrogance" when criticizing the group.
Kremlin said the move aimed to help stabilize the market.
"The OPEC and the OPEC+ format is the structure, which, repeatedly, has proved its reputation as a responsible organization, which oversees the stability of global energy markets," Kremlin Spokesman Dmitry Peskov said when asked about U.S. criticism of the decision.
Separately on Wednesday, Russian Deputy Prime Minister Alexander Novak said Russia could cut oil output in an attempt to offset the effects of price caps imposed by the West over Moscow's actions in Ukraine.
The West has accused Russia of weaponising energy, with soaring gas prices and a scramble to find alternatives creating a crisis in Europe that could trigger gas and power rationing this winter.
Moscow, meanwhile, accuses the West of weaponising the dollar and financial systems such as the international payments mechanism SWIFT in retaliation for Russia sending troops into Ukraine in February.
Price forecasts updated
Morgan Stanley raised its first-quarter 2023 Brent price forecast to $100 per barrel from $95 per barrel, noting: "Brent will find its way to $100 per barrel quicker than we estimated before."
"We believe that the price impact of the announced measures will be significant," said Jorge Leon, senior vice-president at Rystad Energy.
"By December this year Brent would reach over $100/bbl, up from our earlier call for $89," he said.