Saudi Arabia, Iraq and several Gulf states (OPEC Plus) said on Sunday they were cutting oil production by more than one million barrels of oil a day. OPEC Plus includes the main OPEC countries and Russia and a few other countries.
The reduction in output is being made by members of the Opec+ oil producers. The group accounts for about 40% of all the world’s crude oil output.
Saudi Arabia is reducing output by 500,000 barrels per day and Iraq by 211,000. The UAE, Kuwait, Algeria and Oman are also making cuts.
OPEC Plus thinks the world economy can handle up to $100 per barrel without having a bad recession. They think they can sell all the oil they make at $100 per barrel.
OPEC said in its forecast that in 2023, the world oil demand would grow by 2.3 million barrels a day to an average of 101.87 barrels per day.
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If i remember correctly Biden admin is still releasing about 1 million bpd from the SPR. With the Saudi, and others, decision to move away from dollar backed trade they really have no choice, but to cut oil production. High oil prices provides a bit of insurance that there will be no regime change. After overt Trump threat, and Biden’s antipathy towards the House of Saud there must be some jitters in Riyadh.
Might be an interesting study if there are correlations between US oil market manipulations and past regime changes.
Currently – low oil prices (inflation adjusted), heading into major recession, shift away from the dollar international trade, and the response is to release even more SPR oil.
Still, to paraphrase Biden “who would want to be in Xi’s shoes”? And by extension any adversary of the US.
Good. Let them cut their own throat. Nothing like paying $4/gal to drive people to buy EVs.
“OPEC Plus thinks the world economy can handle up to $100 per barrel without having a bad recession. They think they can sell all the oil they make at $100 per barrel.”
Central banks around the world: “Let’s see how well that calculation works with higher interest rates.”
If the US wants to moderate the impact and take advantage of this, it needs to do what’s needed to push its domestic fracking industry back into full pre-Covid production. The can pretty easily respond to the decrease from OPEC+ of a million bbl/day with an increase of 500k that increases GDP, strengthens domestic producers and moderates the price increases and their inflationary sequelae.
It’s true as others have commented that a floor under oil prices helps the transition to renewables.
Best way to accelerate the transition off oil is to keep a floor on oil prices. This is what opec has been doing since the failed price war when Saudi tried (and failed) to crush fracking in the USA. They will maximize their profits in the short to medium term but help to bring about the end of oil more quickly.
It is not just about the price, but complicity of the policy makers who in the West are bought and sold wholesale. Russia, Saudis, China – all have their pet apparatchiks looking out for their geopolitical and economic interests.
If oil prices fall, fracking and many other extraction areas become uneconomic, which is to the benefit of renewables. If oil prices rise, renewables look even cost cost-attractive, which ….. is to the benefit of renewables.