OPEC+ to Cut 100,000 Barrels from October... Biden Pressured Ahead of Midterm Elections (Comprehensive)

US Pressure Nears Resolution of Iran Nuclear Deal Negotiations
Biden's Middle East Visit Futility Debate Likely to Resurface

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The Organization of the Petroleum Exporting Countries (OPEC) and the coalition of non-OPEC oil-producing countries known as 'OPEC Plus (OPEC+)' announced that they will reduce oil production by 100,000 barrels per day starting next month. OPEC+ explained this as a preemptive measure due to recession concerns, but it is interpreted as a warning to the United States ahead of the imminent conclusion of the Iran nuclear deal (JCPOA - Joint Comprehensive Plan of Action) restoration negotiations. Saudi Arabia, which leads OPEC+, has consistently opposed the JCPOA.

Earlier, the U.S. government, with President Joe Biden personally visiting the Middle East to request increased oil production, has expressed reluctance. With the November midterm elections approaching, human rights controversies and criticisms of the trip that surfaced around President Biden’s Middle East visit are reemerging, raising concerns that these issues could become major liabilities in the election.

Oil Production Returns to August Levels... Oil Prices Rebound

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On the 5th (local time), OPEC+ announced at a ministerial meeting to decide production levels that they agreed to reduce daily oil production by 100,000 barrels starting next month. This is a direct cut of the 100,000-barrel increase agreed upon at the meeting on the 3rd of last month. As a result, the oil production of OPEC+ member countries will return to the August level of 43.85 million barrels per day.

The official reason OPEC+ cited for the production cut is concerns over a recession. Prior to the meeting, OPEC+’s Joint Ministerial Monitoring Committee (JMMC) recommended a daily cut of 100,000 barrels due to recession fears. They warned that due to a slowdown in demand, there could be an oversupply of 900,000 barrels per day in the second half of this year.

International oil prices, which had been declining since reaching a peak in May amid recession concerns in the U.S. and China, immediately rebounded. West Texas Intermediate (WTI) rose 2.28% from the previous session to $88.85 per barrel, and North Sea Brent crude increased 2.38% to $95.23 per barrel.

OPEC+ also added that the next meeting to discuss November production will be held on the 5th of next month, and they are considering holding ministerial meetings at any time if necessary depending on market conditions.

JCPOA Deal Nearing Despite Saudi Opposition... Preemptive Response Before Iranian Oil Hits Market

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However, the main reason behind this production cut is interpreted less as recession concerns and more as a preemptive measure aligned with Saudi Arabia and Arab League countries’ opposition to the imminent JCPOA deal and the anticipated influx of Iranian oil into the market.

According to Bloomberg News, JCPOA restoration negotiations are nearing a conclusion, with the U.S. and Iran in the final stages of agreement. If the JCPOA restoration deal is finalized, U.S. sanctions on Iran will be lifted, allowing Iranian oil to enter the international oil market immediately, with an expected production increase of over 1 million barrels per day, Bloomberg reported.

Bill Farren-Price, director at energy market analysis firm Enverus, said at a press conference, "This production cut has political aspects. It sends a strong signal to the U.S. and the international community." He analyzed, "Saudi Arabia wants to send a message to the U.S. as it moves toward finalizing the JCPOA restoration, while Russia wants to make the West pay the price for its sanctions against Russia."

Embarrassed Biden Administration... Concerns Over the Futility of Middle East Visit

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The Biden administration, facing the November midterm elections, has expressed unusual embarrassment over the OPEC+ production cut, even issuing a separate statement.

White House spokesperson Karine Jean-Pierre said in a statement regarding OPEC+’s decision to cut production in October, "President Biden has made it clear that energy supply must meet demand to support economic growth and lower energy prices for consumers in the U.S. and worldwide," adding, "President Biden will continue to take necessary actions to strengthen energy supply and reduce prices."

In July, President Biden made a surprise visit to Saudi Arabia and met directly with Crown Prince Mohammed bin Salman, who is known to be behind the assassination of Jamal Khashoggi, a dissident Saudi journalist and Washington Post columnist. At that time, various human rights organizations in the U.S. and even within the Democratic Party strongly opposed the visit, which ultimately led to a sharp decline in Biden’s approval ratings.

Despite President Biden risking political damage to strongly request increased production by personally visiting the Middle East, the OPEC+ production cut has raised concerns that the visit may be seen as futile once again.

This content was produced with the assistance of AI translation services.