OPEC agrees to keep oil production cut, likely maintaining high prices through November election

The Organisation of Petroleum Exporting Countries (OPEC+) decided on Sunday to extend output restrictions into next year, potentially keeping prices high until the November presidential election.

The alliance said following a meeting Sunday that the action was intended to improve lagging prices, which have remained stable amid the ongoing war in Gaza and attacks on transport boats in the Red Sea.

For the past month, international benchmark Brent has hovered between $81 and $83 per barrel, falling far short of the $100 per barrel levels last seen in late 2022. Higher interest rates, concerns about demand due to slower-than-expected economic growth in Europe and China, and rising non-OPEC supply, especially from shale producers in the United States, are all contributing factors.

The alliance stated that it is extending the extra voluntary cutbacks of 1.65 million barrels per day planned in April 2023 to the end of December 2025.

Saudi Arabia, which leads the alliance, urgently needs a cash infusion as it strives to diversify its economy away from fossil fuel exports. Higher oil prices would also assist partner OPEC+ member Russia to continue economic growth and stability.

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According to analysts, the reduction might drive up oil prices in the coming months and will be closely followed as the November election approaches. The summer normally sees a boost in demand from July to September, but after that, demand uncertainty increases.

U.S. motorists have benefited from lower oil costs, which have been stable in recent weeks, averaging $3.56 a gallon last week. That’s a penny less than a year ago and a drop from the national average high of $5 per gallon in June 2022.