Oil: Geopolitical And Policy Implications Of OPEC+ Cuts Traders Should Consider
Ellen R. Wald, Ph.D | Oct 13, 2022 05:18AM ET
Last week, OPEC+ agreed to a 2 million bpd cut in production quotas for the months of November and December. This cut is slightly larger than what producers discussed leading up to the meeting. The decision had an immediate impact on oil prices, but there are also important market, policy, and geopolitical implications for oil prices that traders should keep in mind over the coming months.
What the initial market reaction shows/h2
Oil prices reacted sharply to last Wednesday's news, and by the end of last week, both the WTI and Brent pressured Saudi Arabia and other Middle-Eastern producers to refrain from cutting production quotas, but the U.S. efforts failed. Now, President Biden has said there will be "consequences" for Saudi Arabia as a result of OPEC+'s decision. It is not clear what these consequences may be or if they will be significant to the oil market. One issue that is being discussed is reviving the NOPEC legislation. If passed, this would make it possible for the Attorney General to sue OPEC producers for anti-competitive practices. This could disrupt the global oil market and potentially raise oil prices. This outcome is highly unlikely. Other potential reactions are not likely to impact the oil market.
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