A decision by the OPEC+ alliance of oil-exporting nations to sharply cut output and raise crude prices has hit consumer nations and prompted accusations that Gulf producers are siding with Russia at the expense of the United States and its Western allies.
The 13-nation OPEC group and 10 allies led by Moscow agreed to cut production by two million barrels per day (bpd) starting in November at a meeting in Vienna.
The Biden administration, which has been engaged in diplomatic efforts for months to dissuade its allies in the Middle East from cutting oil production, has reacted in desperation to further increases in pump prices ahead of key midterm elections.
White House press secretary Karine Jean-Pierre told reporters on Wednesday that OPEC+ called the decision “short-sighted” as the global economy is still reeling from “persistent negative effects.” [Russian President Vladimir] Putin’s intervention in Ukraine”.
“It is clear that OPEC+ is aligned with Russia with today’s announcement,” Jean-Pierre said.
But OPEC rejected this accusation. “This is not a decision by one country against another,” the group’s secretary-general, Haitham al-Ghais, said on Friday.
“I want to make it clear and this is not a decision of two or three countries against a group of other countries,” al-Qais told Al Arabiya TV.
Saudi Arabia, one of OPEC’s main players, also said the move was necessary to respond to rising interest rates in the West and a weak global economy.
“Show me where the fighting is,” Energy Minister Prince Abdulaziz bin Salman said, adding that markets “require leadership that investment is not going to happen.”
Gambling at high prices
Kuwait’s acting oil minister, Mohammad al-Fares, said on Wednesday that while the alliance understood consumers’ concerns about rising prices, their main concern was “maintaining the balance between supply and demand”.
Carole Nakhle, head of consulting firm Crystal Energy, rejected the explanation. “The market always balances itself, it’s the basics of the interaction between supply and demand,” Nakhle told Al Jazeera.
“The difference is that if you release it to the market, it can give you a much lower price than what OPEC wants to see.”
Analysts saw the move as a rise in geopolitical temperature to see the risk of a global economic recession as well as prices holding around current levels.
“OPEC+ probably feels it has some time to see if the world economy can avoid recession and if the group can keep crude oil prices the right side of $90 a barrel,” wrote energy analyst Clyde Russell. A column for Reuters.
While the two-million-barrel-a-day reduction in production quotas did not translate into a reduction in global supply by the same amount, research firm Rystad Energy still put the likely actual reduction at about 1.2 million barrels.
“We believe the price impacts of the announced measures will be significant,” Vice President Jorge Leon told Al Jazeera in an email.
Forecasts predicted that oil prices would fall by the end of the year, but after the OPEC+ decision, the price of Brent oil could now exceed $100/barrel, from the previous call of $89/barrel in December.
A political transition towards the Kremlin?
Washington is furious that Saudi Arabia would support a move that, despite its short-term economic benefits, conflicts with Riyadh’s long-term security interests and weakens Biden’s vision ahead of the November election.
In addition, Russia has benefited from high oil prices, which have so far allowed the Kremlin to withstand the shock of Western sanctions.
The OPEC+ decision came a day after EU ambassadors agreed on new economic measures aimed at undermining Russia’s war effort in Ukraine, including a price cap on the sale of Russian oil and a ban on most crude imports. next months.
Although a direct link between the two events can only be inferred, “there must be some policy [in the OPEC+ decision]”Ben McWilliams, an energy consultant at the Bruegel think tank in Brussels, told Al Jazeera.
From an economic perspective, the argument made by oil-producing countries that the global recession has depressed prices is contradicted by the fact that current crude oil prices are above $85 a barrel – which in normal times would not require intervention.
“It’s clear that there is some sort of alignment with Russia,” McWilliams said.
But not everyone agreed.
Dina Esfandiary, senior adviser to the International Crisis Group on the Middle East and North Africa, played down the willingness of the Gulf states, which voted in March for a UN General Assembly resolution condemning Moscow’s aggression in Ukraine and have since tried to keep a low profile. Unite with Russia.
“It’s unfair to say they’re siding with Russia — they’re siding with themselves,” Esfandiary said.
Nevertheless, the move could be an “irritation” to the Biden administration, whose failed diplomatic efforts to halt oil production cuts are a signal that it is waning influence over its Gulf allies.
The months-long pressure campaign culminated in Biden punching Saudi Arabia’s Crown Prince Mohammed bin Salman in July, a sign of the administration’s intention to move forward with holding the Saudi leader accountable for the killing of journalist Jamal Khashoggi.
“Ultimately, I think we’re in this new era where the Gulf Arabs are making decisions for themselves,” the ICG analyst said. “Although the US is an important guarantor of security, they no longer listen to everything the US asks of them.”