The world's major oil producers have agreed to steep production cuts to drive up prices, inflaming diplomatic tensions with the US, which called the surprise decision "short-sighted", and accused Saudi Arabia of aligning with Russia. 

Organisation of the Petroleum Exporting Countries (OPEC) and their allies, including Russia, have decided to cut oil output by 2 million barrels a day, equal to 2 per cent of global supply. 

Those cuts are the biggest since the start of the COVID-19 pandemic in 2020, and block efforts by the US and Europe to reduce the revenue that Russia earns from the sale of its crude oil. 

There are fears the move could further hit the slowing global economy and raise prices at the pump in the US ahead of Congressional elections next month.

The Saudi-led coalition ignored pleas from the White House to keep oil flowing, and said the agreement would remain in place until the end of next year, unless the market changed. 

Saudi Arabia said the production cuts were necessary to respond to rising interest rates and a weaker global economy. 

The White House said that US President Joe Biden had directed the Department of Energy to release for sale extra supply from the country's strategic oil reserves. 

It said Mr Biden would consult with Congress to explore ways to boost energy production and reduce OPEC's control over oil prices.

It was a slap in the face for Mr Biden, who visited Saudi Arabia earlier this year to improve relations between the kingdom and the US.

Rising oil and fuel prices are a risk to Mr Biden's Democratic Party as it seeks to retain control of Congress in the November 8 midterm elections. 

The US and Europe want more oil produced to reduce petrol prices and punish Russia for invading Ukraine. 

OPEC's decision came after the European Union agreed to new sanctions against Russia for its invasion of Ukraine. These include a price cap on Russian oil exports. 

Russian Deputy Prime Minister Alexander Novak said Russia might cut oil production to offset the impact of price caps imposed by the West over the invasion of Ukraine. 

Saudi Energy Minister Prince Abdulaziz bin Salman rebuffed criticism from the White House that it was colluding with Russia, and denied that the production cuts were an act of aggression. 

OPEC Secretary-General Hatiham Al Ghais also defended the production cuts. 

"We are not endangering the energy markets," he said. 'We are providing security, stability to energy markets."

The production cuts could drive up oil prices, which have dropped to below $US90 a barrel from $US120 a barrel three months ago. 

Brent crude surged by 1.9 per cent overnight, to $US93.54 a barrel, while West Texas crude rose 1.6 per cent, to $US87.87 a barrel. 

However, the production cuts will be less than 2 million barrels of oil a day in reality because of under-production.

OPEC+ fell around 3.6 million barrels a day short of its output target in August because of underinvestment in oil supplies and infrastructure. 

The Saudi Energy Minister said the real cuts would be 1 million to 1.1 million barrels of oil a day. 

Trade surplus narrows 

Australia's trade surplus dropped in August as imports rose more than exports, and export prices fell. 

Imports rose to record highs, driven by fuel and lubricants, while coal, liquefied natural gas and iron ore dominated the exports. 

Australia imported more fuel and lubricants, and consumer goods, which suggests the supply chain logjam has eased.

CommSec said Australia imported $10.6 billion worth of goods from China, the most imported from any country in a single month. 

The data also showed that more Australians are travelling overseas, with fewer tourists coming here. 

Australia's trade surplus came in at $8.3 billion in August, down more than half from the record high of $17.5 billion in June. 

June's record high was driven by the surge in commodity prices, partly because of the war in Ukraine. 

Other economic data showed that job ads fell again in September.  

Employment website Seek said job ads dropped for the fourth month in a row, with white-collar jobs among the industries that saw fewer vacancies.

However, amid the national labour shortage, the level of job ads was up by half, compared to before the COVID-19 pandemic started. 

Dollar rises 

The trade numbers boosted the Australian dollar. 

At 4pm AEDT, the dollar was up 0.7 per cent, to around 65.34 US cents. 

Investors will be looking at the Reserve Bank's latest Financial Stability Review, which will outline its views on the housing market and banks. 

The Australian dollar had a volatile session overnight, falling to a low of 64.20 US cents after strong US economic data. 

Spot gold eased back overnight, towards $US1,700 an ounce, on the stronger greenback. 

In afternoon trade, it was up 0.4 per cent, to $US1,722.48 an ounce. 

ASX lower

The local share market moved between gains and losses, after its best two-day rise in more than two years as the Reserve Bank of Australia raised rates by less than expected.

In the end, the market finished where it started the day. 

The All Ordinaries ended at 7,034, up 0.03 per cent, while the ASX 200 index was unchanged, at 6,818, up 0.03 per cent. 

All of the big banks lost ground. 

Most sectors fell on the ASX 200, among them real estate stocks, consumer firms and financials. 

Energy firms led the gains on higher oil prices, among them Woodside Energy (+2.6 per cent) and Whitehaven Coal (+7.2 per cent).

Artificial intelligence firm Appen (-11.7 per cent) warned its earnings for the 2022 financial year could fall by more than 80 per cent because of weaker advertising revenue and a slowdown in spending by some major customers. 

Magellan loses more investors

Investment house Magellan Financial (-8.4 per cent) saw clients withdraw more funds over September. 

Funds under management fell nearly 12 per cent, to $50.9 billion, a fall of more than half from a year ago. 

It suffered the biggest fall on the ASX 200 index.

Star Entertainment ended steady as Queensland said it was unfit to hold a casino licence in that state. 

Rio Tinto (0.2 per cent) signed an amended $100 million loan agreement with Energy Resources of Australia so it can clean up the Ranger uranium mine in the Northern Territory. 

That's after ERA chairman Peter Mansell and two board members agreed to resign after Rio Tinto demanded they step down amid a dispute over the clean up of the mine. 

Wall Street down

US stocks closed lower after a two-day rally as economic data showed demand for workers remained strong, stoking fears of more large interest rises by the US central bank. 

Private employers increased hiring last month, according to the ADP National Employment Report. 

Another report showed that the services industry remained resilient in the face of rapid rises in interest rates. 

The ISM services index fell slightly but was still expanding for the 28th month in a row in September. 

US Federal Reserve officials stuck to their message that interest rates would stay higher for longer, with Federal Reserve Bank of Atlanta's Raphael Bostic saying he thinks the federal funds rate should rise to 4 to 4.5 per cent, and stay there for some time. 

The US market ran out of steam in late trade, with Wells Fargo bank saying one large option trade drove a big surge during the session.

Meanwhile, the Dow Jones Index fell 0.1 per cent, to 30,274, the S&P 500 index lost 0.2 per cent, to 3,783, while the Nasdaq Composite fell 0.3 per cent, to 11,149. 

ABC/Reuters

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