Saudi Energy Minister Abdulaziz bin Salman Al Saud arrives in Vienna on October 5 for the OPEC meeting. VLADIMIR SIMICEK / AFP
We don’t know what to remember first of the joint decision by Saudi Arabia and Russia on Wednesday October 5th to tighten the oil valves sharply: an economic measure intended to support the price of black gold and increase fuel consumption will lead prices; or the warm understanding shown by the Wahhabi kingdom and the regime of Vladimir Putin under the nose of Western countries and especially the United States, which in vain are demanding that the countries of the Arab-Persian Gulf pump more?
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For the first time since the start of the Covid-19 pandemic in March 2020, the thirteen members of the cartel and their ten partners, grouped within OPEC+, gathered at the Organization of the Petroleum Exporting Countries (OPEC) headquarters in Vienna and decided to increase their daily production by 2 April million barrels (2% of global demand), the largest cut decided since April 2020. They had then taken 10 million barrels a day off the market after consumption – and prices – collapsed from the global lockdown imposed at the start of the pandemic.
Producing countries have been concerned about the downward trend in prices since early June, when a barrel was worth $125, after hitting $140 at the start of the war in Ukraine. They fear being caught unawares by a recession in late 2022/early 2023, fueled by rising interest rates and the strength of the dollar. OPEC’s monthly bulletin in mid-September underscored these macroeconomic risks without panicking the global economy. OPEC now wants “prices around $90,” Nigerian Oil Minister Timipre Sylva said after the meeting.
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A rebuff for Washington
When energy ministers met in Vienna, North Sea Brent was trading at $91 and US West Texas Intermediate (WTI) at $86. Markets had expected a 500,000 drop to 1 million barrels earlier in the week and prices did not rise after OPEC+ announcement: Brent for December delivery closed at 93.37 (+1.70%) in London . , the WTI, at $87.76 (+1.43%) in New York. “The price increase will be limited,” said Jorge Leon, vice president of Rystad Energy, in a statement released on Wednesday by the Norwegian specialist company shortly before the OPEC+ announcement.
The expert gives three reasons. The cut cannot be fully implemented as the cartel is already producing 3.5 million barrels below its official cap. Furthermore, Saudi Arabia, the United Arab Emirates and Kuwait are the only ones capable of doing so. Finally, the market is likely to be in surplus in the fourth quarter, thanks to US production at its highest level since late 2019. Rystad Energy has calculated that a reported drop of 1.5 million barrels per day (and an actual drop of almost a million ) would push a barrel to almost $100.
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