US hits out at latest 'unadvisable' OPEC production cuts
Quantum Commodity Intelligence – The US government has slammed the decision by OPEC+ members to reduce crude production further, sparking fears that higher oil prices could reignite global inflation.
The Saudi-led decision was also seen further as souring relations between Riyadh and Washington after last year's war of words when OPEC+ announced a headline 2 million bpd output cut.
"We don't think cuts are advisable at this moment given market uncertainty — and we've made that clear," a spokesperson for the National Security Council told political publication The Hill in reaction to Sunday's announced cuts, which saw Brent crude prices spike 6% by Monday's London close.
Last October, US officials strongly opposed the OPEC+ cut, even floating the possibility of economic retaliation against Saudi.
In an interview with CNN, National Security Council coordinator for strategic communications John Kirby said Biden is "willing to work with Congress as we think about what the right relationship with Saudi Arabia needs to be going forward."
US sources also told the Wall Street Journal at the time officials had warned Saudi leaders that a cut would be viewed as a clear choice by Riyadh to side with Russia in the Ukraine war.
Snubbed
Analysts said the latest oil cuts will likely leave Washington again feeling snubbed by its long-term ally.
A truce was called earlier this year as the Biden administration ended its talk of retaliation against the Kingdom, but the row now looks set to rumble on.
"OPEC led by Saudi Arabia, which has shown its displeasure with the Biden administration and their misuse of the Strategic Petroleum Reserve, were reportedly angered on comments by Energy Secretary Jennifer Granholm that they had no plans to buy oil back to refill the reserve even as the Silicon Valley Bank failure caused oil liquidation and had oil fall below $70 a barrel," said Phil Flynn of The Price Futures Group.
In March, the US pushed back on previous comments that it would begin a buyback programme to refill depleted SPR tanks when WTI spot oil prices are in the low $70s per barrel range.
The International Energy Agency also weighed in, saying global oil markets were already set to tighten in the second half of 2023, with the potential for a substantial supply deficit to emerge.
"The new OPEC+ cuts risk exacerbating those strains and pushing up oil prices at a time when strong inflationary pressures are hurting vulnerable consumers around the world, especially in emerging and developing economies," said the Paris-based agency.
Meanwhile, Monday's OPEC+ Joint Ministerial Monitoring Committee (JMMC) confirmed Sunday's announced cuts, including 500,000 bpd from Saudi.
The JMMC communique also acknowledged a 500,000 bpd cut from Russia, which was extended until the year's end.
Russian Deputy Prime Minister Alexander Novak described Moscow's cut as a "responsible and preventive step" due to recent "volatility and unpredictability" caused by the ongoing banking crisis in the US and Europe, global economic uncertainty and unpredictable and "short-sighted decisions" in energy policy.
"At the same time, predictability on the global oil market is a key element in ensuring energy security," said Novak.
