An employee of the Saudi state oil company Aramco, in a file photo.Ahmed Jadallah (Portal)
The West’s relentless battle against inflation has a new front. The world’s two largest oil exporters, Saudi Arabia and Russia, sent crude oil prices above $90 a barrel on Tuesday for the first time since November last year by saying they will maintain their voluntary production cuts through the end of the year. The move is bad news for the European Central Bank (ECB) and the US Federal Reserve (Fed), which see how an exogenous factor beyond their scope of action is complicating their fight against rising prices. In Spain, the increase in fuel prices was the main reason for the recent increase in the CPI in August.
Riyadh and Moscow are heeding the West’s repeated warnings that the global crude oil market could become too tight, which could turn against them: the more expensive fuels are, the more incentives there are for the electrification of transport and the development of vectors. fossil energy sources such as renewable hydrogen. Regardless of these votes, the leaders of the OPEC+ cartel (the expanded version of the Organization of the Petroleum Exporting Countries) decided this Tuesday to expand their collective production to 1.3 million barrels per day in three months (one million from Saudi Arabia, 300,000 Russian). barrels).
Although the movement can be observed month after month, it shows that both countries – and especially Saudi Arabia – prefer to sell less but at a higher price in the always complex dilemma between volumes and prices. So far the calculations are clear: since July, when the voluntary cut came into force, the petromonarchy has sold 10% less crude oil, but at a 20% higher unit price.
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Although the scenario of an extension of the Snip was by no means ruled out, especially given the recent public positions of the Saudi authorities, those who follow daily life in the oil market still considered the possibility that Riyadh and Moscow would be happy with the recent increase be. – Before the double announcement, Brent prices had already seen a notable rise over the summer – putting their foot up in Europe amid problems in the engine room of China’s economy and signs of a slowdown. The voluntary cut by Saudi Arabia and Russia, announced in early June, comes in addition to the supply reduction commitment made in April by almost all OPEC+ members and will last until the end of 2024.
“This is something surprising and the market reaction was immediate,” Jorge León, vice president and head of oil analysis at energy consultancy Rystad Energy, said by phone. The big question, he says, is why now, when oil prices were already trading at levels more than comfortable for their interests. “There are two possible answers: they are concerned about the situation in China and a possible weakness in global demand and have decided to first take measures to limit the possible fall in prices in the coming months. or who want to take advantage of the rise in crude oil prices and want something more.” León opts for the second option: “If you look at the global mobility data, there is nothing that suggests a major slowdown in oil demand in the near future.”
Apart from the ECB and the Fed, for whom their already complicated work is complicated, the news is also bad news for the President of the United States, Democrat Joe Biden – who has been at odds with Riyadh for months and is one of its major enemies of the Kremlin – who faces re-election in November next year. For the North American giant, the price of gasoline is more than just another element in the inflation basket: it is no less a subordinate element in the electoral decision-making process.
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