OPEC Cuts Oil Output
An alliance between Saudi Arabia, Russia and other major oil exporters shook markets on April 2 by declaring that they would reduce oil production by more than 1.6 million barrels per day. The announcement sent both Brent crude futures (the worldwide oil benchmark) and wti (the American benchmark) soaring by 6 percent.
The Saudi-led Organization of Petroleum Exporting Countries (opec) and its partner oil exporters in “opec+” (including Russia) said the cuts would begin in May and continue through the year.
A boon to Russia: The Biden administration said the cuts are misguided since the world needs low oil prices to boost economic growth and to hinder Russian’s ability to earn revenue to finance its war on Ukraine.
We don’t think cuts are advisable at this moment given market uncertainty—and we’ve made that clear.
—John Kirby, U.S. National Security Council spokesman
Such U.S. objections are unlikely to reverse the move. In February, Russia unilaterally enacted cuts to its oil production in response to America and other Western nations placing price caps on Russian sales to keep the nation’s revenues artificially low. U.S. officials said at the time that Russia’s unilateral move meant its alliance with opec nations was weakening. But the April 2 announcement shows that cooperation remains robust and is partly designed to boost Russian power.
Aside from the impact on the physical oil market, it is hard not to think that there is some geopolitical posturing embedded in these voluntary cuts. It demonstrates the group’s support for Russia and flies in the face of the Biden administration’s efforts to lower oil prices.
—Caroline Bain, chief commodities economist at Capital Economics
Choosing sides: The move to support Russia follows Saudi Arabia’s recent proclamations that it is considering trading oil in currencies other than the U.S. dollar. These developments show that Saudi Arabia, a longtime U.S. partner, is distancing itself from America during a pivotal time of global tensions. This could have major implications for the global power balance. In our May-June 2023 Trumpet issue, we wrote:
Since the end of World War ii, the United States has relied on a partnership with Saudi Arabia both to keep the peace in the Middle East and keep Western economies’ oil supply secure. … If the U.S. were to break with Saudi Arabia, that … could have a ripple effect on America’s relations with the rest of the Middle East.
Because of Bible prophecy, the Trumpet expects such a break to soon take place and for Saudi Arabia to ally with Germany in a partnership that will work openly against the United States. To understand, read the chapter titled “Another, More Mysterious Alliance” from Trumpet editor in chief Gerald Flurry’s booklet The King of the South.