OPEC+ Oil Supply Cuts Could Push World Into Recession: IEA

A 3D-printed oil pump jack is seen in front of the OPEC logo in this illustration picture, on April 14, 2020. (Dado Ruvic/Reuters)

The International Energy Agency (IEA), which includes the United States as a key member, has warned that the recently announced OPEC+ oil supply cuts could push up energy prices, adding fuel to “unrelenting inflationary pressures” and tipping the world into a recession.

The agency said in its latest oil market report, released on Oct. 13, that oil demand is falling as central banks hike rates to tame soaring inflation, deepening the economic slump.

“The relentless deterioration of the economy and higher prices sparked by an OPEC+ plan to cut supply are slowing world oil demand,” the agency said.

The IEA warned that “disruptive market forces” were multiplying as the world struggles to navigate “the worst global energy crisis in history,” with the OPEC+ supply cuts pushing up prices and increasing market volatility.

“With unrelenting inflationary pressures and interest rate hikes taking their toll, higher oil prices may prove the tipping point for a global economy already on the brink of recession,” the IEA stated.

Earlier in October, the OPEC+ alliance of crude-producing countries agreed to slash oil output by 2 million barrels per day, delivering a blow to President Joe Biden’s pleas to the cartel to ramp up production.

The White House sharply criticized OPEC+ for the cuts, calling the decision a “mistake” and accusing the alliance of “aligning with Russia.”

Following the OPEC+ meeting at which the supply cuts were decided, United Arab Emirates Energy Minister Subail al-Mazroui said that OPEC’s decision was based on technical considerations and the decision wasn’t “political.”

More recently, the government of Saudi Arabia, a key player in OPEC+, claimed that the Biden administration had requested a delay in the oil supply cuts until after the U.S. midterm elections.

Saudi Foreign Minister Prince Faisal bin Farhan al-Saud also accused the U.S. government of attempting to “distort” the facts about the kingdom’s position on the Russia–Ukraine conflict.

State Department spokesperson Ned Price denied reports that the Biden administration had asked the cartel to delay its decision to cut oil production until after the midterms.

“I certainly can’t confirm that report. What I can confirm is that we conveyed a consistent message to the Saudis: Energy supply needs to meet energy demand,” Price said at an Oct. 12 State Department press briefing.

The Saudi foreign minister said in a statement that “all economic analyses indicate that postponing the OPEC+ decision for a month, according to what has been suggested, would have had negative economic consequences.”

The Biden administration had for months lobbied Saudi Arabia to pump more crude, with those efforts falling flat.

The White House didn’t respond by press time to a request for comment on the Saudi official’s claims that it had asked OPEC+ to postpone the cuts until after the midterms.

Caden Pearson contributed to this report.