6th Jul 2022

EU condemns OPEC oil production cut

  • Commissioner Piebalgs said oil prices should be left up to the market to decide (Photo: European Commission)

A surprise decision by OPEC, the group of major oil-exporting countries, to lower its oil production by 520,000 barrels a day has sparked criticism from the EU and the US.

EU energy commissioner Andris Piebalgs said that OPEC's decision to cut back supplies - the first such cut since December 2006 - increases volatility and is bad for the market. Speaking to reporters in Abuja, Nigeria, on Wednesday (10 September) he suggested leaving the price determination to market forces.

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The International Energy Agency (IEA) has also described the move as "counterproductive and unhelpful, raising concerns over the impact the move will have on growth and inflation.

"We are concerned about the potential of oil prices to remain at very high levels. At $100, the price of oil remains very high," David Fyfe, the head of the IEA's oil industry and markets division, was cited as saying by the Financial Times.

He added: "A combination of weak economic prospects and persistently high prices appears to be having an impact on consumer behaviour and choices."

One barrel of 'black gold' currently sells for almost $99 a barrel. The price of petrol rose from ten dollars in 1999 to $95 last year and a peak of $149 in April this year.

As a result, the Paris-based agency predicts, the major industrialised countries will use less oil this and next year. In figures, global demand is set to decrease by 100,000 barrels to 86.8 million barrels a day in 2008 and by 140,000 barrels to 87.6 million barrels a day in 2009.

The OPEC decision led to a temporary marginal rise in international prices of crude that later receded.

Chakib Khelil, the president of the Organisation of Petroleum Exporting Countries, said the situation will be re-assessed at the end of the year.

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