The White House is out with a comment saying that the OPEC+ production cut is a ‘clear’ indication that the bloc is ‘aligning with Russia’.
They’re totally right but it’s also something that should have been entirely foreseeable when the US led an effort to put a price cap on Russia oil.
Bloomberg’s Javier Blas put it this way:
Hovering over the OPEC+ meeting in Vienna is an unspoken fact: beyond Russia, many, many member-countries despise the G7 oil price cap. For them, it’s a terrible precedent of consumers trying to dictate oil prices. It may or may not influence the talks, but it’s there.
If you’re Saudi Arabia’s Mohammed bin Salman — who is still reeling from the Khashoggi fallout — why would you tolerate a price cap? If it works on Russia, why couldn’t it be used on you? OPEC is full of countries that aren’t friendly with the United States and allowing a Russian price cap to work would set a terrible precedent for them.
So the next question is: What exactly is their aim?
A best case scenario is that they’re simply trying to put a floor under oil at $80-90 per barrel. That would ensure Russia has markets to sell its oil into and retains some leverage.
A worst case is that they’re lining up behind Russia in an energy war. Everyone needs oil and by putting a squeeze on the world they could realign the politics of Europe in order to generate some permanent leverage. They will never have a better moment to play that card.
