UNEXPECTED Decision By OPEC+: How Will THIS Impact The 2024 U.S. Elections?

By Javier Sanchez | Tuesday, 04 June 2024 10:30 AM
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Image Credit : Watchwire AI

In a move that could potentially escalate energy prices in the United States ahead of the crucial 2024 elections, the Organization of Petroleum Exporting Countries and its allies (OPEC+) have internally agreed to extend their oil production cuts, as reported by Reuters on Monday.

Comprising mainly Middle Eastern nations and other oil-producing states, the oil cartel has decided to extend the current production cuts of 3.66 million barrels per day until the end of 2025. Additionally, it will continue its ongoing cuts of 2.2 million barrels per day through September 2024, according to Reuters. The Wall Street Journal suggests that this decision to prolong the cuts could result in high oil prices persisting through the upcoming presidential election this fall.

Currently, OPEC and its allies are curtailing their production by approximately 5.8 million barrels per day, which represents about 5.7% of the global demand, as per Reuters. This decision to extend the cuts by the oil-producing cartel could potentially tip the global market into a supply deficit, a situation that would likely drive up prices.

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With the 2024 elections on the horizon, the Biden administration may be apprehensive about a potential surge in energy costs. The Department of Energy (DOE) recently unveiled a plan to release 1 million barrels of gasoline from the Northeast Gasoline Supply Reserve in an attempt to stabilize prices at the pump. Furthermore, John Podesta, one of the most influential climate advisors in the Biden administration, has suggested the possibility of additional Strategic Petroleum Reserve (SPR) drawdowns if necessary.

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Amrita Sen, the co-founder of Energy Aspects, an energy-focused think tank, told Reuters, “The deal should allay market fears of OPEC+ adding back barrels at a time when demand concerns are still rife.” She added, “It should be seen as a huge victory of solidarity for the group and [Saudi Arabian Energy Minister Prince Abdulaziz bin Salman Al Saud].”

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OPEC's membership includes nations such as Saudi Arabia, Kuwait, the United Arab Emirates, Libya, and Venezuela. Other countries, including Russia, are aligned with OPEC+, but are not full members. Energy market analysts had predicted that OPEC and its allies would extend the production cuts for several months, given the decreasing prices and lack of robust demand, according to Reuters.

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