Saudi Arabia cuts oil production for the third time after a new agreement with OPEC+
Saudi Arabia repeats the move. The world's largest exporter and leader of the Organisation of Petroleum Exporting Countries (OPEC+) has announced a new reduction in oil production by one million barrels per day. Starting in July, when the measure will be implemented, Riyadh will cut from 9 million barrels per day to 10 million barrels per day. The figure represents 1% of the kingdom's global production of black gold and about 10% of the kingdom's output, the most drastic cuts in years.
This is the third time the alliance has drastically cut oil production. It did so in October 2022 with a cut of 2 million barrels per day, and last April with another 1.66 million barrels per day. But neither has met the objective of reaching the maximum level of 80 dollars and thus achieving the crucial "market stabilisation", i.e. that demand does not outstrip supply. So far, the price of oil has risen by 2% to 77.61 dollars.
The urgency has been decisive. Oil prices are dominant for the global energy matrix, but also for Riyadh's own economic health. Hence, the main measure is to cut the tap by one million barrels per day. The remaining members of the alliance merely extended previous production cuts until the end of 2024.
Following a meeting in Vienna, Saudi Arabia's energy minister, Abdulaziz bin Salman, told a press conference that OPEC+ "will do whatever it takes to bring stability back to the market". The Saudi delegate's intentions made clear the possibility of an additional and "voluntary" cut to those already implemented. The West's reaction to the measure is still to come.
Oil: the tightrope between the US and Saudi Arabia
Brent is the benchmark in Europe with a price of 76 dollars per barrel, while the US benchmark WTI is at 71. The price is far from the levels reached in March 2022, at the beginning of the invasion of Ukraine, when it reached 140 dollars per barrel, but the oil cartel's supply cut makes it much more difficult for Western countries to fight inflation and recession.
Joe Biden's administration has been highly critical of the two previous OPEC+ cuts, for which Washington was forced to take help from the Strategic Petroleum Reserve. This is an ace up the sleeve that the US has resorted to several times since the end of 2021 to reduce the prices of this commodity in the country. But Biden's recurring well is not infinite, and Saudi Arabia knows it. A setback for the frozen relationship between the two countries in recent years.
Ukraine, once again the geopolitical centre of attention
The Americans' criticism of the Saudis for cutting oil supplies is framed by the argument that this shutdown only benefits Russia, the invader of the sovereign Ukrainian country. And this is true; the cuts are being suffered both by Ukraine and the Western allies on which it depends as oil prices rise on the market while they cope with runaway inflation. The second reason is that Russia, as a member of OPEC+, also pockets large amounts of money that it invests in its main headache: war.
However, Saudi Arabia's policy is not as ironclad as the United States suggests. In addition to the aid packages that Riyadh has assembled for Kiev, Zelenski was the main protagonist of the latest Arab League summit in Jeddah. It is a diplomatic determination that, according to the Saudi side, contradicts pro-Russian accusations from the US. In any case, Russia has not contradicted Riyadh's move.
