According to Dan Yergin, Washington sees OPEC+ Oil Production Cuts as a Political Blow Against Biden.

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According to Dan Yergin, vice chair of S&P Global, Washington regards OPEC+’s decision to cut oil output by more than 2 million barrels per day as political intervention and a “blow” to US President Joe Biden.

“First and foremost, this is perceived as a rebuke to Biden’s visit to Saudi Arabia.” Second, it is perceived as political meddling in the US election, despite the fact that the cut does not take effect until November,” he stated.

There appears to be a mini-battle between [Strategic Petroleum Reserve] releases at the White House and what’s going on with OPEC+,” said Skylar Capital Management CEO Bill Perkins.

According to Dan Yergin, vice chair of S&P Global, Washington regards OPEC+’s decision to cut oil output by more than 2 million barrels per day as political intervention and a “blow” to US President Joe Biden.

On Wednesday, a group of the world’s most prominent oil producers decided to impose substantial output restrictions to support petroleum prices, despite US pleas to pump more to boost the global economy.

This is considered as a first blow to Biden, who visited Saudi Arabia. Second, it is perceived as political meddling in the US election, despite the fact that the cut does not take effect until November.”

The agreement, agreed during OPEC and OPEC+’s first in-person meeting since 2020 in Vienna, would be the largest decrease since the epidemic began.

In July, Biden visited the Saudi government in an effort to increase oil output and manage surging energy costs.

Following three days of climbing, oil prices climbed to a three-week high on Wednesday after the statement. In early trade, West Texas Intermediate increased 1.4% to $87.76 per barrel, while Brent crude rose 1.7% to $93.37 per barrel.

Oil as a weapon

In a note, Vishnu Varathan, head of economics and strategy at Mizuho Bank, warned, “OPEC+ may find itself pitted against the West with weaponized oil.”

According to him, the oil supply restrictions are “perceived partially as a protest against Russian oil price limits” and reflect the organization’s “naked demand for price buoyancy, not merely support.”

A production decrease of roughly a million barrels per day would have resulted in price increases without sacrificing volume, but the greater drop demonstrates the group’s “disregard for the economic troubles of, and geo-political alignment with, global partners,” according to Varathan.

Similarly, Yergin stated that the accord is viewed “not in economic terms,” but rather in political terms.

The move comes at the same time as the EU has agreed to control Russian oil prices as part of a new sanctions package.

“The Russians have signalled in this and other situations that they will do everything possible to thwart an oil price ceiling,” Yergin added.

‘Dangerous game’

The US Energy Department stated a few weeks ago that it will sell up to 10 million barrels of oil from the SPR for delivery in November.

Perkins noted that the group’s thesis is that market pricing signals are insufficient to “induce the investment or supply reaction” that is required.

Global oil prices soared to more than $120 per barrel after the Russian-Ukraine conflict erupted, but have since dipped to little more than $80 per barrel in the week preceding OPEC+’s agreement to cut output.

When asked whether the alliance’s decision will spur greater investment in crude oil production and infrastructure, Perkins was hesitant.

It’s a smart gamble,” he remarked, “but it’s a dangerous world right now.

“People may feel a little more daring to face the macroeconomic challenges… However, if there is a major recession, one of the first things to disappear is energy consumption.

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