The Biden administration has accused OPEC of siding with Russia after the group revealed a 2 million barrel a day cut to production.
Saudi Arabia and Russia led the OPEC+ group in making deep oil production cuts to try and raise prices.
The decision was taken knowing it risked a backlash from the US and European countries already battling soaring energy inflation.
The White House said in a statement that Biden was “disappointed by the short-sighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of Putin’s invasion of Ukraine.”
It said that Biden had directed the Department of Energy to release another 10 million barrels from the Strategic Petroleum Reserve next month.
“In light of today’s action, the Biden Administration will also consult with Congress on additional tools and authorities to reduce OPEC’s control over energy prices,” the White House said.
News of the cut saw crude prices rise.
West Texas Intermediate crude for November delivery closed up $US1.24 to $US87.76 a barrel, December Brent crude, the global benchmark, was up $US1.63 to US$94.43.
OPEC+ said the 2 million barrel cut would start next month, as it looks to support prices that have fallen 30% since June on slowing growth.
The group, which also extended its mandate by a year to the end of 2023, said the cuts would be made to current production levels, rather than quota levels which most members are unable to meet.
“In my opinion, it is highly unlikely that OPEC+ will cut by 2 million barrels … OPEC+ appears to have a credibility problem. Not a lot of bang for the buck. Nobody really believes their intentions,” Robert Yawger, executive director of energy futures for Mizuho Securities USA, said in a note quoted by Reuters.
The push to cut production included pressure from Russia, which is looking to handicap a G7 initiative to cap the price paid for the country’s oil to hamper its ability to fund its war in Ukraine.
The news helped snuff out a late afternoon run in stocks on Wall Street.
After dragging itself back into the green from big early losses with just over an hour to go, the major market measures turned down again to end the two-day rally with small losses
The Dow fell 42.45 points, or 0.14%, to 30,273.87. Earlier in the day, it was down 429.88 points. The S&P 500 lost 0.20% to close at 3,783.28, and the Nasdaq eased 0.25% to 11,148.64.
Rising bond yields pressures prices – the rate on the benchmark 10-year Treasury climbing to 3.74% after briefly dipping below 3.6% on Tuesday.
All the focus is now on the September jobs report on Friday.
With a sharp fall in US job vacancies (more than a million) in August confirming the Fed’s rate rises are impacting the labour market, US market analysts want to see evidence in the monthly jobs data and unemployment report.
A sharp slide in new jobs, or even a small fall plus a kick up in the jobless rate would be seen as ‘good news’ by Wall Street, even though it would presage a worsening in the labour market heading into 2023 and signal the increased chances of a real recession next year.
