Organization of the Petroleum Exporting Countries (OPEC) headquarters. PHOTO/WIKIMEDIA
Saudi Arabia and other oil producing countries have announced “surprise cuts” of more than 1m barrels per day from May until the end of the year, causing oil prices to surge, the Independent reports.
The paper says: “Higher oil prices would help fill Russian president Vladimir Putin’s coffers as his country wages war on Ukraine and force drivers around the world to pay even more at the pump amid inflation fuelled in part by that conflict. It was also likely to further strain ties with the US, which has called on Saudi Arabia and other allies to increase production as it tries to bring prices down and squeeze Russia’s finances.”
The new cuts come in addition to the two million barrel per day reduction agreed last November, which will last until the end of the year, CityAM notes. BBC News reports that oil prices have “surged” by more than 6% in response to the announcement warning that higher oil prices could make it harder to bring down the cost of living.
Goldman Sachs has raised its year-end Brent crude forecast to $95 a barrel according to the Financial Times and the Guardian, says the decision “looks like a pre-emptive move from the cartel ahead of a likely economic slowdown – and possible recession in the US – later this year”.
The newspaper notes that in the past, OPEC+ has “announced production cuts and then failed to follow through on the commitments”. According to Reuters, Saudi Arabia called the cut “a precautionary measure aimed at supporting market stability”.
The newspaper adds that OPEC+ “clearly wants to prop up the oil price, or – ideally – push it higher” while Politico warns that the move “has thrown a spanner into central banks’ efforts to tame inflation just as pressure on Europe’s cost of living was starting to ease”.
Reuters says that it is “bad news for the European Central Bank as it tries to bring down inflation but will not fundamentally alter the policy outlook” adding: “OPEC’s surprise oil production cuts could lead to higher demand for US oil in Europe and Asia and could encourage some other producers to boost output, industry executives and analysts said on Monday.”
The price surge “underscores the danger of relying on unpredictable fossil-fuel producers”, according to Bloomberg while the Washington Post says that “gas prices are expected to jolt upward”.
Meanwhile, the New York Times reports that US officials have “voiced their displeasure” at the decision. Elsewhere, the Daily Telegraph reports that Putin has “pushed seaborne deliveries of Russian crude to record highs to fill Moscow’s war chest”.
And a Reuters “exclusive” report says that Russia’s largest oil producer and India’s top refiner “agreed to use the Asia-focused Dubai oil price benchmark in their latest deal to deliver Russian oil to India”.
The newswire says this is “part of a shift of Russia’s oil sales towards Asia after Europe shunned Russian oil following Russia’s invasion of Ukraine more than a year ago”.