OPEC+ on Wednesday agreed to impose deep output cuts to oil production in an effort to spur a recovery in crude prices, the Wall Street Journal reported.

During its first face-to-face gathering since 2020, the group, which combines OPEC countries and allies such as Russia, decided to slash production by two million barrels per day from November. The cut amounts to about 2 percent of the world’s daily oil production.

The move represents the largest slash to production since 2020, when OPEC+ reduced output by a record ten million barrels per day in response to plummeting demand due to the Covid-19 pandemic.

After soaring above $100 a barrel in the first six months of the year due to Russia’s invasion of Ukraine, oil prices have trekked lower by more than 30 percent over the past four months.

Rohan Reddy, director of research at Global X ETFs, told CNBC that the production cuts could potentially lift oil prices back to the $100 level.

“Due to the decision, volatility will likely return to the market, and despite concerns about the resilience of the global economy, the oil market is tight, all of which should serve as a tailwind for prices in the fourth quarter,” he said, adding that “a more likely scenario in the short term is that oil prices hover in the $90 to $100 range as the market digests economic data releases.”

Other analysts questioned OPEC+’s timing of the production cuts. “In its own words, OPEC’s mission is to ensure an adequate pricing environment for both consumers and producers. Yet the decision to reduce output in the current environment runs counter to this objective,” Stephen Brennock, a senior analyst at PVM Oil Associates in London, said in a research note.

“Further squeezing already-tight supplies will be a slap in the face for consumers. The selfishly motivated move is aimed purely at benefiting producers,” he continued. “In short, OPEC+ is prioritizing price above stability at a time of great uncertainty in the oil market.”

In Washington, the White House reacted with disappointment to the news, as the Biden administration had wanted the group to pump more to lower fuel prices ahead of the midterm elections next month.

“We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that,” said National Security Council spokesperson Adrienne Watson, per CNN.

Meanwhile, National Security Council coordinator John Kirby played down the OPEC+ agreement. “So in some ways, this announced decrease really just kind of gets them back into more aligned with the actual production,” he said.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters