Even if Saudi Arabia and other leading oil-exporting countries cut their production targets this week, spurning U.S. efforts to keep supplies flowing, the move may barely register in global oil prices. Here's why
A Saudi Aramco tank farm for crude oil and refined products near the Persian Gulf port of Ras Tanura in Dharhan, Saudi Arabia on Jan. 11, 2018. Over most of the year, the Biden administration has, with limited success, urged Persian Gulf countries to pump more oil. (Christophe Viseux/The New York Times)
Even if Saudi Arabia and other leading oil-exporting countries cut their production targets this week, spurning U.S. efforts to keep supplies flowing, the move may barely register in global oil prices.
An output cut by Saudi Arabia and its allies would reinforce the growing perception that Crown Prince Mohammed bin Salman of Saudi Arabia and President Vladimir Putin of Russia are working closely together to manage oil markets. That is not what President Joe Biden had in mind when he visited Saudi Arabia in July, shared a fist bump with Crown Prince Mohammed and called for more production.
But the cut being considered — up to 1 million barrels a day by OPEC+ — may amount to little more than symbolism, given countervailing forces in the global oil market.
Global inventories and spare capacity are considered to be well below the levels that would assure stability. And by early next year, European sanctions over Russia’s invasion of Ukraine are intended to tighten, in a bid to curb Russian oil sales, and the United States is planning to stop drawing down its Strategic Petroleum Reserve.
Given those circumstances, a cutback by OPEC+ — the confederation of the Organization of the Petroleum Exporting Countries and several other producers, including Russia — would ordinarily put a higher price on oil. This time, however, the decrease in supply would coincide with falling demand in China and Europe.
©2019 New York Times News Service