Market Extra: Here’s what is really behind OPEC+ oil-production cuts, say energy analysts

by | Apr 4, 2023 | Stock Market

An unexpected production cut announced on Sunday by OPEC+ oil producers complicates strained relations between the U.S. and Saudi Arabia, with investors seeing signs of geopolitical posturing in the decision. However, some market analysts contend the cuts were less about sending a message to Washington and more about stabilizing oil prices amid fears of recession, as well as protecting the supply and demand balances.

See: 6 things investors need to know about the surprise OPEC+ production cuts Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries on Sunday announced they would slash a further combined 1.16 million barrels per day of oil production from May until the end of 2023. Russia, stinging from price caps and embargoes on its energy products as a result of its invasion of Ukraine, said it would extend its 500,000 barrel-a-day production cut through year-end. Together OPEC and its allies, led by Russia, make up the group known as OPEC+. Some news reports and market analysts have speculated that the surprise move was motivated by geopolitics and Saudi Arabia’s fraying ties with the United States. U.S. Energy Secretary Jennifer Granholm said in March that the U.S. would not replenish the Strategic Petroleum Reserve because of maintenance at two of the four sites. The Financial Times reported, citing people familiar with Saudi Arabia’s thinking, that Riyadh was “irritated” by that comment.  OPEC+ in October announced a similar cut of 2 million barrels per day, equal to 2% of global supply, saying it was necessary to respond to rising interest rates in the U.S. and a weaker global economy. The call prompted President Biden to accuse the country of sliding with Russia in an attempt to trigger an energy crisis, while vowing “conse …

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