DNYUZ
A cartel of oil-producing countries led by Saudi Arabia agreed to steep cuts in oil production, defying a behind-the-scenes diplomatic push by the Biden administration to avert cuts that could push up global gasoline prices and may offer a small lifeline to Russia’s battered wartime economy.
In a meeting on Wednesday in Vienna, the OPEC+ group that comprises most of the world’s top oil exporters agreed to cut production, on paper, by 2 million barrels per day, the biggest slash in production since the beginning of the COVID-19 pandemic in 2020. In reality, the cartel will probably shave something like 1 million barrels off the market, since most OPEC members are already underproducing. Crude prices nudged upward Wednesday but didn’t spike.
“They agreed to a larger cut on paper so they wouldn’t have to renegotiate quotas, which is always like pulling teeth,” said Matthew Reed, an expert on the oil industry and the vice president of Foreign Reports, a Washington-based consulting firm. “This is crucial. It means OPEC will take less oil off the market than the headlines suggest.”
The reason for the cuts, despite protestations from the White House, is not punitive politics. Rather, it’s the specter of a looming global recession that will cut deeply into global oil demand. Last week, Goldman Sachs cut its 2023 oil price forecast from an earlier prediction of $125 per barrel to $108, following a sluggish global demand for oil, which was exacerbated by central banks tightening rates worldwide.
Still, for the Biden White House, which courted Saudi Arabia and other Gulf countries this year to ensure a plentiful supply of oil, the decision is a blow. Two of Washington’s most important Middle Eastern partners, Saudi Arabia and the United Arab Emirates, sided with other major oil powers, including Russia, in the decision to slash oil production. Multiple senior Biden administration officials, including Amos Hochstein, President Joe Biden’s leading energy envoy, played a role in the failed campaign to pressure OPEC+ members to avoid the cuts, as CNN reported.
The announcement sparked anger among U.S. lawmakers, including allies in Biden’s Democratic Party, who have criticized the president for pursuing closer relations with Saudi Arabia in recent months. “I thought the whole point of selling arms to the Gulf States despite their human rights abuses, nonsensical Yemen War, working against US interests in Libya, Sudan etc, was that when an international crisis came, the Gulf could choose America over Russia/China,” Democratic Sen. Chris Murphy, a member of the Senate Foreign Relations Committee, commented on Twitter.
“President Biden should make it clear that we will stop supplying the Saudis with weapons and air parts if they fleece the American people and strengthen Putin by making drastic production cuts,” Rep. Ro Khanna, a progressive Democrat, said of the news. “They need us far more than we need them…
Connect with us on our socials: