Americans are going to experience more pain at the pump. “OPEC+, the cartel of the Saudi-led Organization of the Petroleum Exporting Countries plus Russia and a few others, had scheduled a virtual meeting for April 3. On March 28, Bloomberg reported that “OPEC+ shows no sign of changing oil output at a meeting next week.” Well, guess what? On April 2, Saudi Arabia announced a “voluntary cut of 500,000 barrels per day [about 5 percent of its production] in coordination with some other OPEC and non-OPEC countries,” wroteThe Hill.
The New York Timesreported that “the surprise announcements signaled a potential new threat to global efforts to curb inflation and a challenge to the Biden administration, which has pushed for lower gasoline prices. In particular, production cuts could further aggravate strained relations between the United States and Saudi Arabia, the de facto leader of OPEC. Last year, President Biden made a special appeal to Saudi Crown Prince Mohammed bin Salman to increase oil production, only to have OPEC trim its output at its next meeting.
European stock markets were mixed on Monday, while the S&P 500 opened slightly higher.
Saudi Arabia said it would cut production by 500,000 barrels a day starting next month. Combined with cutbacks announced by several other OPEC producers, the cut in production will be over one million barrels a day, or about 1 percent of global oil supplies.
Analysts said the move has shown once again that Saudi Arabia and its oil minister, Prince Abdulaziz bin Salman, are determined to be proactive in order to keep prices high, perhaps in the range of $90 a barrel.
CNN explained that “oil prices sunk as low as $73 and $67 a barrel respectively in the week following the collapse of Silicon Valley Bank in the United States on March 10, as the turmoil spread to the wider banking sector, raising fears of a global recession.
With oil prices now rising, inflation could remain higher for longer, adding pressure to a hot-button issue for consumers around the world.
‘The development comes as a blow for inflation,’ Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in a note Monday. ‘Markets are aware that if the pressure continues, central banks will need to extend or strengthen their interest rate hiking cycles.’”
During the summer last year, President Biden visited Saudi Arabia and seemed to bend over backwards to show deference to the current crown prince, Mohammed bin Salman, even giving him a fistbump that received condemnation from those who have accused the Saudi leader of murdering Washington Post journalist Jamal Khashoggi.
The president attended a summit of the Gulf Cooperation Council plus Egypt, Iraq and Jordan — known as the GCC+3 — where he talked about ramping up oil production with the member states.