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OPEC agrees to continue oil production cuts, which will likely keep prices high until November elections

The Organization of the Petroleum Exporting Countries (OPEC+) agreed on Sunday to extend production cuts into next year, which will likely keep prices high until the presidential election in November.

The alliance said after a meeting on Sunday that the move was aimed at boosting prices, which have calmed despite the ongoing war in Gaza and attacks on transport ships in the Red Sea.

Brent, the international benchmark, has held in the range of $81-$83 per barrel over the past month, falling far short of levels of $100 per barrel not seen since late 2022. Reasons include lower interest rates high and concerns about demand due to slower than desired economic growth in Europe. and China, and the increase in non-OPEC supply, particularly from American shale producers.

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The alliance said it was extending additional voluntary reductions of 1.65 million barrels per day announced in April 2023 until the end of December 2025.

Saudi Arabia, which dominates the alliance, desperately needs an influx of cash as it seeks to diversify its economy away from fossil fuel exports. Higher oil prices would also allow Russia, another OPEC+ member, to maintain economic growth and stability as it spends heavily in its war against Ukraine.

Analysts say the cuts could push oil prices higher in the coming months and will be closely watched as the November election approaches. Summer typically sees a surge in demand in the July-September quarter, but demand uncertainty increases thereafter.

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American motorists have benefited from falling oil prices, which have stagnated in recent weeks, averaging $3.56 per gallon last week. That’s down from a penny less than a year ago and down from the national record average of $5 a gallon in June 2022.

The Associated Press contributed to this report.

News Source : www.foxbusiness.com
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