‘It’s No Longer a Unipolar World’; Saudis Announce Surprise Coordinated Cut in Oil Output of 1.125 Million BPD
April 3, 2023, 2022 (EIRNS)—The government of Saudi Arabia stunned the oil and financial world today, announcing that they and a number of other oil producing nations had decided to cut oil production by over a million barrels per day (bpd), in order to help “stabilize” oil markets after the price dropped when the banking crisis hit in mid-March. London and Washington are particularly angered because the move goes against President Joe Biden’s request for more oil production, to try to keep inflation down, and also because the move will help Russia get more revenue through higher oil prices. The Saudi move may even have been coordinated with Russia, which is extending its own cut of 500,000 bpd of output until the end of the year.
The Financial Times today worried that “the Saudi-led initiative is unusual as it has been announced outside a formal OPEC+ meeting,” noting that it put “Riyadh on a collision course with the U.S. as the Kingdom attempts to boost prices amid fears of weaker demand.... The surprise cuts risk reigniting disputes between Riyadh and the U.S.”
The FT cited Helima Croft, head of commodity strategy at RBC Capital Markets of Canada, a leading global investment bank (read speculator), to make the broader strategic point: “It’s a Saudi-first policy. They’re making new friends, as we saw with China... The Kingdom was sending a message to the U.S. that ‘it’s no longer a unipolar world.’ ”
Croft is referring to the announcement earlier this year that Saudi Arabia would be accepting payments in yuan from China for its sizable oil exports to that country, and accepting clearing house arrangements totally beyond the reach of the dollar and its killer sanctions policy.
Other announced voluntary cuts include Iraq (211,000 bpd), the U.A.E. (144,000 bpd), Kuwait (128,000 bpd), Kazakhstan (78,000 bpd), Algeria (48,000 bpd) and Oman (40,000 bpd), according to statements from their respective governments. The Independent reported that the cuts total 1.15 million bpd, adding angrily: “Higher oil prices would help fill Russian President Vladimir Putin’s coffers as his country wages war on Ukraine.... It was also likely to further strain ties with the United States, which has called on Saudi Arabia and other allies to increase production as it tries to bring prices down and squeeze Russia’s finances.”
CNN reported that oil prices spiked on Monday, April 3, after the announcements, with Brent crude, the global benchmark, jumping 5.31% to $84.13 a barrel, the sharpest price rise in almost a year.