IP- The decision by the Organization of Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to cut oil production by two million barrels per day (bpd) starting in November will have a muted impact on the global oil market since the actual output cuts will be smaller, Fitch Ratings said Monday.

Iran PressEurope: "The recent increases in global oil inventories suggest that the market is in a production surplus," the global rating agency said in a report.

"We expect OPEC+ to target a broad balance in the oil market by changing production quotas and available crude supplies, although it may become increasingly difficult to achieve a consensus among the members due to demand uncertainties and the recession in large developed markets," it added.

Fitch said Saudi Arabia and the United Arab Emirates will have to make the largest actual cuts in oil production, while many other OPEC countries will have some room under their quotas to increase production.

While Kuwait and Iraq are required to cut oil production relative to their August output level, Nigeria, Angola, and Azerbaijan have some room to increase their crude production, according to the report.

"A recessionary economic outlook will lead to lower oil demand, although demand has recently been boosted by switches from gas to oil in energy generation, driven by soaring natural gas prices, particularly in Europe and the Middle East," the report said.

The agency noted that it expects price volatility to remain high in the global oil market in the short term due to geopolitical factors that have the potential to significantly shift supply patterns and cause large price fluctuations.

Some of these major geopolitical factors are additional Western sanctions that could lead to further reduction in Russian oil exports, and an agreement on the Iran nuclear deal that could see oil production rising in the country, according to Fitch.

While the US has been critical about the OPEC+ decision to lower oil production, President Joe Biden last week announced the release of an additional 10 million barrels from the US' strategic petroleum reserves to global oil markets starting next month.

Kremlin praises OPEC+ for countering U.S. 'mayhem'

The Kremlin on Sunday praised OPEC+ for agreeing with production cuts that had successfully countered the "mayhem" sown by the United States in global energy markets.

The OPEC+ decision to cut oil production despite stiff U.S. opposition has further strained already tense relations between President Joe Biden's White House and Saudi Arabia's royal family, Reuters reported on Saturday.

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The White House pushed hard to prevent the output cut. Biden hopes to keep U.S. gasoline prices from spiking again ahead of midterm elections in which his Democratic party is struggling to maintain control of the U.S. Congress.

Kremlin spokesman Dmitry Peskov said it was very good that such "balanced, thoughtful and planned work of the countries, which take a responsible position within OPEC, is opposed to the actions of the U.S.".

"This at least balances the mayhem that the Americans are causing," Peskov said, according to Russian news agencies.

U.S. Treasury Secretary Janet Yellen said a decision by OPEC+ to cut oil production was "unhelpful and unwise" for the global economy, the Financial Times reported.

Peskov said that the United States had begun to lose its composure over the OPEC decision and was even trying to push additional volumes of its reserves into the market.

"They are trying to manipulate with their oil reserves by throwing additional volumes into the market. Such a game will not lead to anything good," Peskov said.


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