OPEC agrees to keep oil production cut, likely maintaining high prices through November election
Saudi Arabia has ambitions to diversity its economy away from fossil fuel exports
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The Organization of the Petroleum Exporting Countries (OPEC+) on Sunday agreed to extend output cuts through next year, likely keeping prices high through the November presidential election.
The alliance said after a meeting Sunday that the move was aimed at boosting slack prices that have lulled despite the ongoing war in Gaza and attacks on shipping vessels in the Red Sea.
Russia's Energy Minister Alexander Novak (L) and his counterparts from Saudi Arabia Prince Abdulaziz bin Salman (C-L) and the UAE's Suhail Al-Mazroui (C-R) walk out with other delegates after the end of OPEC meeting in Riyadh, on June 2, 2024. (HAITHAM EL-TABEI/AFP via Getty Images / Getty Images)
International benchmark Brent has loitered in the $81-$83 per barrel range for the past month, reaching nowhere near the $100 per barrel levels not seen since late 2022. Reasons include higher interest rates, concerns about demand due to slower than desired economic growth in Europe and China, and rising non-OPEC supply including from U.S. shale producers.
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The alliance said that it is extending additional voluntary cuts of 1.65 million barrels per day that that were announced in April 2023 through the end of December 2025.
Saudi Arabia, which dominates the alliance, desperately needs an inflow of cash as it seeks to diversify its economy away from fossil fuel exports. Higher oil prices would also allow fellow OPEC+ member Russia to maintain economic growth and stability as it spends heavily on its war against Ukraine.
FILE PHOTO: A 3D-printed oil pump jack is seen in front of the OPEC logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/File Photo (REUTERS/Dado Ruvic/File Photo / Reuters Photos)
Analysts say the cuts could push oil prices higher in coming months, and will be heavily watched going into the November election. The summer usually sees a spike in demand through the July-September quarter, but uncertainty about demand grows after that.
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U.S. motorists have benefited from weaker oil prices which have stagnated in recent weeks, averaging $3.56 per gallon last week. That’s just a penny less than a year ago and down from a record national average high of $5 per gallon in June 2022.
The Associated Press contributed to this report.