On Oct. 5, the Organization of the Petroleum Exporting Countries (OPEC) and its oil-producing allies that comprise OPEC+ announced they would be cutting oil production by two million barrels a day (b/d). In response, many Americans likely bristled at the possibility of going through another period of significant hikes in fuel and heating oil prices.
Curbing production by 2 million b/d — the equivalent of 2% of the global supply and about twice the amount the U.S. has been releasing daily from its strategic petroleum reserve — was justified by OPEC as a precautionary measure to provide stability amid rising Western interest rates and a weakened global economy, Reuters reported.
Oil prices have risen 13% in five days, according to Business Insider — and barring effective mitigation measures by the federal government and its energy advisors, the only sure thing in sight is that higher prices are on the way for crude oil and, thus, heating oil.
Per Time, according to its Sept. 12 report, the National Energy Assistance Directors Association estimates heating bills will soar by 17% across the U.S. this winter, which is approximately $177 more on average and the highest cost in more than a decade. These projections were made a month prior to the OPEC announcement on Oct. 5, a perhaps threatening sign.
Also before this recent production decision by OPEC and partners, CNBC reported that analysts at Goldman Sachs were predicting a return to a $100 barrel over the next three months — and rising to $105 within six. The mere threat of OPEC+ reducing production coincided with a 4% increase in oil prices on Oct. 3, with Brent crude rising 4% and U.S. West Texas Intermediate climbing 4.2%.
According to the Associated Press, the oil cuts will be less deep than the 2 million stated due to underproduction from some OPEC member states. However, the threat of increasing oil prices and heating bills for American consumers remains real.
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OPEC+ is expected to begin its production cuts in early November. In September, the U.S. Department of Energy’s Office of Petroleum Reserves announced it would sell up to 10 million barrels of crude oil to be delivered from the Strategic Petroleum Reserve (SPR) in November 2022, a release which may offset a bit of the damage coming from OPEC+’s planned oil production cuts, per CNBC.
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