This is the largest production cut since the start of the pandemic and, as much as Washington has tried to the contrary, it has not been able to cross its line
of Athena Papakosta
THE OPEC+ decision, after the suggestion of Russia and Saudi Arabia, to cut oil production by two, finally, million barrels per day was taken. This is the largest reduction in production since the beginning of the pandemic and, as much as Washington tried to the contrary, it did not manage to cross its line.
Moscow has managed to find an ally in the ongoing energy war it has waged in recent months against the West. Saudi Arabia was unconvinced by the United States – despite Biden’s visit almost three months ago to Riyadh – and the crown prince, Mohammed bin Salman, preferred to stand by his relationship with the Kremlin.
The timing of this decision matters. Six months ago, oil prices had soared as high as $130 a barrel because of Russia’s invasion of Ukraine, and now the “oil war” is escalating, once again.
In a written statement, the US National Security Adviser, Jake Sullivan, and the head of the country’s National Economic Council, Brian Deasy, emphasize that the US president is “disappointed by this short-sighted decision”.
The United States they were pushing for as much further release of stored oil as possible to reduce energy costs, a key move ahead not only of winter but also of the country’s midterm elections in November. At the same time, by calling for increased production, they aimed to lower energy prices that fuel inflation while putting further economic pressure on Moscow, which depends heavily on oil revenues, money it funnels into its war machine.
Many, in fact, were the countries that stopped buying oil from Russia after the invasion on February 24 this year, and Russian oil ended up costing $30 less than Brent.
JP Morgan reckons Washington will not stand idly by and almost certainly believes it will retaliate by releasing strategic US oil reserves. As, characteristically, it is mentioned in the announcement of the White House, in the context of the decisions of last March, an additional 10 million barrels of oil are expected to be released next month, without excluding further actions.
The focus is also on the geopolitical field as the decision by OPEC+, which includes the 13 OPEC member countries and their 10 allies – including Russia – creates problems for the West’s attempt to win the economic war with the Kremlin.
Recently, oil prices have been falling, allowing – mainly the EU – to take a breather while its battle with natural gas prices continued. The scene, however, changed after the announcement of a cut in oil production by two million barrels per day and Brent, on Wednesday, rose by 2% to $93 a barrel. Analysts speak of inevitable price increases and cost pass-through.
Russia is currently China’s largest oil supplier and India’s third largest. Together, these two countries imported, last March, more oil than the 27 Member States of the Union. Europe once accounted for half of Russia’s total oil exports. Now, amid ominous predictions of global economic… disarray, Brussels is preparing to ban Russian crude imports, inevitably putting further pressure on global oil markets.
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I have worked in the news industry for over 10 years and have been an author at News Bulletin 247 for the past 5 years. I mostly cover technology news and enjoy writing about the latest gadgets and devices. I am also a huge fan of music and enjoy attending live concerts whenever possible.
