The analysts (including myself) and journalists who cover the global oil markets sometimes mistake market developments for a game of Risk with two or more masterminds playing for mastery of the board.
The analysts (including myself) and journalists who cover the global oil markets sometimes mistake market developments for a game of Risk with two or more masterminds playing for mastery of the board. This week’s meeting of OPEC+ member countries, which cut the global crude oil supply by 2.0 million barrels per day (b/d), is a case in point. With the whole world watching, this decision may be over-analyzed for its geopolitical portent. Reporting has suggested it represents a snub of the Biden administration, a realignment of Saudi Arabia with Russia over the United States, a punishment of Europe and Ukraine, a statement against last Friday’s price cap on Russian oil cargoes.
For sure, stakeholders make decisions that can have multiple intended and unintended consequences and invite many different interpretations. If we consider the facts in the market, however, it may be easier to understand this OPEC+ decision as more a tactical move than a strategic advance. Moreover, it does not preclude new decisions that reverse this one in the months ahead. Even though the communique indicates the agreement will extend though the end of 2023, it provides for ad hoc changes along the way.
