Oil Prices Jump After Surprise OPEC Production Cut

“This is probably not their last production move of the year,” Mr. Morse said.

OPEC Plus, made up of OPEC as well as Russia and some others, produces roughly half of the world’s oil. The group had not been scheduled to hold a formal oil ministers’ meeting until June, but the Saudis apparently decided that action was needed. Prices have been weak recently, although they recovered slightly in recent days as banking problems appeared to ease. A dispute between Iraq and Kurdistan had recently disrupted some oil supplies, but a potential settlement was announced over the weekend.

The sight of prices dipping toward $70 a barrel in mid-March was probably unsettling for the Saudis and, analysts say, they may have resolved to act before more bad news propelled the markets down further. Saudi Arabia needs high oil revenues to support ambitious development schemes aimed at diversifying the kingdom’s economy away from oil.

Some analysts say that the Saudis had little choice but to act.

“This move by OPEC Plus looks to restore its credibility as being a proactive, pre-emptive force,” said Gary Ross, chief executive of Black Gold Investors, a trading firm.

What’s clear is that the Saudis are likely to make moves that they decide are in their interest even if their decisions irritate the Biden administration and complicate the U.S. Federal Reserve’s efforts to ease inflation.

“It has been apparent that Saudi Arabia is prepared to endure increased friction in the bilateral relationship” with Washington, wrote Helima Croft, an analyst at RBC Capital Markets, in a note to clients.

Ms. Croft said that the Saudis now view Washington as “just one of several partners” rather than their most important ally, as in the past.

Article source: https://www.nytimes.com/2023/04/03/business/oil-prices-opec-cut.html