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Lower global demand can offset any supply cuts through OPEC and its allies.
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By Clifford Krauss
Houston Report
Although Saudi Arabia and other major oil-exporting countries cut production targets this week, thwarting U. S. supply efforts. In the US, the measure may have slight compatibility with global oil prices.
A production cut through Saudi Arabia and its allies would generate the growing belief that Saudi Crown Prince Mohammed bin Salman and President Vladimir V. Russia’s Putin works together to manage oil markets. That’s not what President Biden had in mind when he visited Saudi Arabia in July, shared a coup with Prince Mohammed and called for more production.
But the expected relief, up to a million barrels a day through OPEC Plus, could be little more than symbolic, given the countervailing forces in the global oil market.
Global stocks and spare capacity will be well below levels that would provide stability. And early next year, European sanctions opposing Russia’s invasion of Ukraine are expected to be tightened, in a bid to curb Russian oil sales, and U. S. plans. The U. S. government is to prevent exploitation in its strategic oil reserve.
Under those circumstances, a cut through OPEC Plus, the confederation of the Organization of the Petroleum Exporting Countries and several other producers besides Russia would increase the value of oil. This time, however, the drop in source would coincide with a drop in calling for China and Europe.
After Russia’s invasion of Ukraine in February, oil costs soared to more than $130 a barrel, but have since fallen by about a third. This is basically because predictions of a sharp drop in Russian exports so far have been overblown, locking down once-bustling cities to prevent the spread of the coronavirus, and the U. S. The US and its allies have released more than a million barrels per day from their reserves.
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