The OPEC plus bloc of oil exporting nations has moved to cut production sharply, a decision expected to reverberate through economies worldwide and push fuel costs higher in many regions.
Starting in November 2022, daily output will be trimmed by about 2 million barrels as the group cites uncertainty about the prospects for the global economy and the oil market. Saudi Arabia’s energy minister, Abdulaziz bin Salman, reiterated the alliance’s role in maintaining stability in energy markets and preventing sharp swings in prices.
Even with the prospect of tighter oil supplies, benchmark crude has traded below peak summer levels amid worries that economic growth in the United States or Europe could stall due to ongoing inflation. A weaker demand outlook could soften the impact of the supply cut, potentially offsetting some of the upward pressure on prices.
The White House warned that the move would hit lower income and middle income countries hardest, compounding already elevated energy costs for households across many regions.
Stockpiles could tighten over the coming months as Western energy policies restrict imports from Russia, with new sanctions and price caps shaping the flow of oil to global markets. If supply remains constrained by these measures while the cost floor stays in place, some markets could face tighter availability rather than just higher prices for crude and refined products.
In such a scenario, where production is reduced and price controls limit revenue, oil prices could climb quickly and exert pressure on inflation-reliant sectors. While some markets may experience only a relative squeeze, others could face a genuine shortage of crude and related products.
Yet in Russia there is a different dynamic at play. The government has implemented a compensation mechanism for losses on domestic oil and fuel sales, shielding local producers from the full impact of external price swings. The adjustment coefficient used to manage this buffer was revised in the summer and will stay in place through the year’s end, with the possibility of further tweaks if international conditions demand it.