Saudi Arabia and US clash over OPEC+ oil cuts

  • Saudi Arabia rejects political framing of OPEC+ decision
  • The US says the delay would be economically negative
  • It states that the decision was taken on the basis of market balance, control of volatility
  • The White House says it has provided an analysis of what the cuts would affect

CAIRO, Oct 13 (Reuters) – Saudi Arabia dismissed as “not based on facts” OPEC+’s decision last week to cut its oil output target despite U.S. objections, and said on Thursday it would delay Washington’s request for a month. had negative economic consequences.

The White House pushed back against that on Thursday, giving the Saudis an analysis showing the cuts could hurt the global economy. The back-and-forth has already added to a frosty period in relations between the two countries, which have had an energy-security alliance for decades.

OPEC+, a producer group that includes the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, announced last week that it would cut its production target by 2 million barrels a day after weeks of lobbying against such a move by U.S. officials.

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Although fuel markets are tight, inventories in major economies are at lower levels than when OPEC cut production in the past.

The OPEC+ cuts have raised concerns in Washington about the potential for higher gasoline prices ahead of November’s US midterm elections, as Democrats try to retain control of the House of Representatives and Senate.

US President Joe Biden promised earlier this week that there would be “consequences” in US relations with Saudi Arabia after OPEC+’s move.

The OPEC+ decision was adopted by consensus, taking into account the balance of supply and demand and aimed at curbing market volatility, the Saudi Foreign Ministry said in a statement on Thursday.

The Saudi Foreign Ministry statement referred to consultations with the US ahead of the October 5 OPEC+ meeting, in which it was asked to delay the cuts by a month.

“The Kingdom clarified through its ongoing consultations with the US administration that all economic analyzes suggest that postponing the OPEC+ decision by one month would have negative economic consequences,” the Saudi Foreign Ministry said.

The United States has accused Saudi Arabia of supporting Moscow, which opposes a Western cap on Russia’s oil prices in response to its aggression in Ukraine.

“We analyzed Saudi Arabia to show that there is no market basis to cut production targets and that they could easily wait until the next OPEC meeting to see how things developed,” White House spokesman Jack Kirby said in a statement. Other OPEC countries told the US they were “compelled” to support the Saudi decision.

A Saudi Foreign Ministry statement, citing an unnamed official, emphasized the “purely economic context” of the oil cut. Global oil demand has weakened as OPEC, the US Department of Energy and the International Energy Agency cut their 2023 demand forecasts this week.

However, OPEC’s move could worsen demand, the IEA added on Thursday, adding that “higher oil prices could prove a tipping point for a global economy already on the brink of recession.”

Saudi Arabia’s statement said the kingdom views its relationship with the US as a “strategic relationship” and emphasized the importance of mutual respect. The Gulf Cooperation Council (GCC) issued a statement in support of Saudi Arabia’s comments, praising the government’s efforts to protect the market from volatility.

In research last week, Goldman Sachs said OPEC had never cut production in the past 25 years — inventories at the Organization for Economic Co-operation and Development, the world’s 38 richest economies, were much lower. OECD stocks are currently 8% below their five-year average. However, they noted that OPEC cut production at a time of weak demand.

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Reporting by Ahmad Elhamy, Moaz Abd-Alaziz and Maha El Dahan; Editing by Jacqueline Wong, Tom Hogue, Jane Merriman and Marguerite Choi

Our Standards: Thomson Reuters Trust Principles.

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