Energy crisis: OPEC cuts crude oil and Russia closes its gas pipeline

The energy crisis is deepening. Following the cut in gas supplies announced by Russia after declaring that it will not resume supplies to Europe via the Nordstream 1 gas pipeline, now, in a new setback, the members of the Organisation of Petroleum Exporting Countries (OPEC) have announced a cut in oil production to 100,000 barrels a day.

This decision, which will affect 23 countries from 1 October, is in response to fears that with the arrival of the economic crisis there will be less demand for the "black gold". Thus, the slight increase in pumping decreed on 3 August, which "slightly" alleviated the increase in crude oil prices, will be cancelled.

Following the decision taken in August, in a monthly teleconference on the website of the Organisation of Petroleum Exporting Countries (OPEC) and through a joint statement, the members warned of the "very limited availability" of capacity to pump crude, which required that supply be used "with great caution".

Now, the Organisation's ministers have agreed to "return to the August 2022 production level", recalling that the production increase of "0.1 million barrels per day (mbd) was only planned for September". 

Moreover, in a joint communiqué, they have reported on the possibility of convening "a new OPEC ministerial meeting at any time to address market developments, if necessary", which shows the lack of certainty about the oil market, its supply and prices in the short term. They also reiterated that this latest decision was taken after reviewing "current market fundamentals" and reaching a "consensus on the market outlook".

Following the new decision, the price of a barrel of Brent crude has risen by 4.14%. Following this rise, Saudi Arabia, the country that heads the Organisation along with Russia, has warned about the negative impact of the tightening of sanctions on Russian oil supply, which increases "price volatility".

Europe is going through one of its most complicated scenarios in terms of energy supply. In addition to the reduction in oil supplies, the cut in gas supplies through the Nordstream 1 pipeline is a setback for Europe, especially for the countries of Eastern Europe, which are highly dependent on Russian gas.

This cut-off by Moscow will continue as long as the West continues to decree new sanctions against Russia that continue to suffocate its economy. In the words of government spokesman Dimitri Peskov, "there are no other reasons that could cause problems with gas pumping", other than Western sanctions.

In view of the new situation, the president of the European Commission, Ursula Von der Leyen, tweeted that the Commission is preparing "to make new proposals for vulnerable households and businesses to help them cope with high energy prices".

Von der Leyen stressed that "Europe will prevail" and Putin "will fail". She accuses him of using energy as a "weapon of war" by cutting off supplies and "manipulating energy markets". 

The European Commission has therefore proposed reducing energy demand, approving a price cap on Russian gas and helping the most vulnerable consumers and businesses, as well as allowing "support for electricity producers facing volatility-related liquidity challenges".

For the time being, the Kremlin has decreed that the gas cut-off will remain in place for an "indefinite" period. Meanwhile, Europe continues to search for gas alternatives that can supply Russian gas in record time as winter approaches and with it, the cold weather.