Crude oil prices surged roughly 6% Monday morning following an unexpected Saudi-led decision by OPEC to slash oil production over the weekend, The Wall Street Journal reported.
The collection of countries, which included members of the OPEC+ group that includes Russia and other non-OPEC members, collectively moved to cut roughly 1.16 million barrels per day Sunday, according to Reuters. The move was partly motivated by U.S. Energy secretary Jennifer Granholm’s recent statement that it would take years to refill the U.S. Strategic Petroleum Reserve (SPR), contradicting previous reassurances to Saudi Arabia that the U.S. would begin making purchases as oil prices fell, the Financial Times reported.
The Biden administration sold 180 million barrels of crude oil from the SPR in 2022 to tamp down prices at the pump, a move that sent the SPR to its lowest level since 1983. Some critics alleged that the Biden administration’s move was motivated by a desire to keep gasoline prices down in an election year.
The production cuts, unusually announced outside of a formal OPEC+ meeting, sent Brent crude to nearly $85 per barrel Monday morning, according to Axios. Oil prices had generally been falling amid recessionary fears, exacerbated by several bank collapses in the U.S., the WSJ reported.
Saudi Arabia has been increasingly drifting from the U.S. and toward China amid ongoing tensions between the Middle Eastern nation and the Biden administration, Helima Croft, head of global commodity strategy at RBC Capital Markets, told the FT. China recently brokered a deal between Saudi Arabia and longtime rival Iran, reestablishing diplomatic relations between the two nations, while Aramco, a Saudi firm and the largest oil producing company in the world, last week announced a pair of multibillion investments in Chinese oil projects.
“It’s a Saudi-first policy,” Croft told the FT. “They’re making new friends … it’s no longer a unipolar world.”
The Biden administration had expressed to OPEC+ that it believed the cuts were not “advisable,” a spokesperson for the U.S. National Security Council told Reuters.
“We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear,” the spokesperson told Reuters. “We’re focused on prices for American consumers, not barrels, and prices have come down significantly since last year, more than $1.50 per gallon from their peak last summer.”
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