Renewed differences between Washington and OPEC + after the decision to cut oil production
In a new defiance step, the Kingdom of Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries (OPEC +) announced, yesterday, Sunday, more cuts in oil production by about 1.16 million barrels per day, despite successive attempts by the US administration to pressure the kingdom to increase production in hopes of increasing production. Limit price hikes.
On the first day of the week, the price of Brent crude rose by the most in nearly a year, jumping $4.75, which represented more than 6% of its value before the decision to cut production was announced.
Washington criticized the decision, as confirmed by the strategic communications coordinator at the US National Security CouncilJohn KirbyToday, Monday, the Organization of the Petroleum Exporting Countries (OPEC) cutsOPEC) for production “not recommended due to uncertainty in the market”.
“The White House made this clear to OPEC,” Kirby said, noting that the United States will continue to work with producers and consumers to ensure growth and lower prices for consumers.
Analysts said that this reduction is in addition to what Russia announced about a reduction of about 500 thousand barrels per day of its production from February production levels, until the end of the year, which makes the voluntary cuts of OPEC + members exceed 1.6 million barrels per day.
They pointed out that the “OPEC +” decision may be in response to what US Secretary of Energy Jennifer Graholm announced that it could take several years to compensate for the stocks that the US administration decided to release during the past months.
Decisions to reduce production, from the group of countries that produce nearly 40% of global production, are of particular importance to US President Joe Biden, who is preparing to launch his re-election campaign, as he hopes to eliminate the high inflation rate, before reaching the election date.
On more than one occasion, Jerome Powell, Chairman of the US Federal Reserve, stressed that the rise in energy prices, including oil, was the main factor for the rise in the rate of inflation in America.
Tamas Varga, market analyst at the oil contracting broker “BVM”, expected that the organization’s recent decision would cause a rise in voices calling for punishment of “OPEC +” in Congress, and supporters of the “No OPEC” or “NOPEC” legislation.
The proposed legislation would place OPEC + member states in front of possible legal measures, accusing them of monopoly.
On many occasions, the Biden administration criticized the OPEC+ group for reducing production, pointing to the rise in prices in America, which increases the difficulties faced by American families.
The administration leveled accusations against some countries that it considered cooperating with Russia, which is under sanctions.
The restrictions imposed on production lead to lower supply, and thus higher prices, which provides the money that Russia needs to finance its war on Ukraine.
In the aftermath of OPEC + taking a decision in October, less than a month before the mid-term congressional elections, to further reduce oil production by two million barrels per day, tension escalated between the United States and the West in general on the one hand, and the oil-producing countries and Saudi Arabia in particular on the other hand. This prompted the US president and his administration to openly threaten Saudi Arabia with “consequences.”
Then the response came decisively and collectively, in the name of all the Gulf countries that produce about 20% of global oil production and huge amounts of gas, through the Gulf Cooperation Council statement that supported Saudi Arabia in the face of the threats it receives from the Biden administration.
The Saudi government said at the time that the recent cut in oil production aimed to “preserve a sustainable oil market,” but the White House accused Riyadh of siding with Russia in its war against Ukraine, and warned that the United States was looking to “reassess” its relationship with the kingdom as a result. .
And last July, Biden visited the Kingdom, and met with Crown Prince Mohammed bin Salman, to say to the White House after his return to Washington: “We expect that the major oil producers in the (OPEC +) alliance will increase crude production, in the wake of the US President’s trip.”joe bidento the Middle East”.
White House spokeswoman Karen Jean-Pierre told reporters, “We will measure success in the next two weeks… We expect there will be an increase in production,” adding that this is the responsibility of “OPEC +.”
And after the markets expected an increase of about 500 thousand barrels per day, OPEC + decided a weak increase, which did not exceed one hundred thousand barrels per day, which caused prices to rise at the time, and to approach them again after a short period of one hundred dollars per barrel.
Three weeks later, Saudi Energy Minister Prince Abdulaziz bin Salman told Bloomberg that the OPEC+ alliance had the means to deal with challenges, such as the possibility of cutting oil production.
In the aftermath of the Russian invasion of Ukraine, in March 2022, and coinciding with the price of a barrel of Brent oil touching the price of $140 a barrel, OPEC + announced the continuation of its strategy of slightly increasing oil production, despite Western pressures to increase production.
The White House was then forced to announce a plan to withdraw up to one million barrels per day from US strategic reserves.
Also, the relationship between “OPEC +” and former President Donald Trump was complex, and it was often dominated by rivalry, as Trump used to criticize the organization for causing high oil prices, which he said harmed American consumers.
Trump threatened to take action against OPEC, including tariffs on oil imports, but his longstanding desire to maintain a close relationship with Saudi Arabia prevented him from doing so.
In 2020, the Covid pandemic caused a sharp drop in oil demand, and then a collapse in oil prices, which threatened to harm the US oil industry. Trump then urged OPEC to cut production to support oil prices, which it did.
