- OPEC+’s October decision to cut supply by 2 million barrels per day (Mb/d) is the biggest cut since April 2020. The effective cut, however, will be much smaller since many OPEC+ members have been producing below their quotas.
- While this decision will exhibit upward pressure on oil prices, the risk of a recession in the main economic blocs is still putting a pressure in the opposite direction.
- Political decisions will also shape the direction of oil prices. For instance, by the end of this year, the EU’s sanctions on Russian seaborne oil will take effect, and the price cap on Russian oil will be fixed.
- As long as China, India and Turkey – the main importers of Russian oil – don’t join the G7 in setting a price cap, the impact of such a measure on global oil markets will be limited.
- OPEC+’s latest decision and its implications on oil prices will affect Joe Biden’s popularity in the upcoming mid-term elections to a certain extent. Economically, however, the US won’t be as badly affected as high oil prices will benefit US oil producers.