Saudi Arabia, US clash over reason for OPEC+ oil cut

  • Saudi Arabia refuses to call OPEC+ decision political
  • Said he told the United States that a delay would be economically negative
  • Said decision was based on market equilibrium, limiting volatility
  • White House says it presented analysis saying cuts would hurt

CAIRO, Oct 13 (Reuters) – Saudi Arabia has dismissed as “unfounded” criticism of an OPEC+ decision last week to cut its oil production target despite U.S. objections, and said Thursday that Washington’s request to delay the reduction for a month would have had negative economic consequences.

The The White House postponed against that on Thursday, claiming to have presented the Saudis with an analysis showing the cuts could hurt the global economy. The back-and-forth added to what has already been a chilly period of relations for the two countries, which have had an energy-for-security alliance for decades.

OPEC+, the producer group made up of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, announced last week cutting of 2 million barrels per day to its production target after weeks of lobbying by U.S. officials against such a move.

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The move came even though fuel markets remain tight, with inventories in major economies at levels lower than when OPEC cut production in the past.

The OPEC+ cut has raised concerns in Washington about the possibility of higher gas prices ahead of the US midterm elections in November as Democrats try to retain control of the House of Representatives and the Senate.

US President Joe Biden promised earlier this week that “there will be consequences” for the United States reports with Saudi Arabia after the OPEC+ decision.

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

The statement from the Saudi Foreign Ministry refers to consultations with the United States ahead of the Oct. 5 OPEC+ meeting in which it was asked to delay the cuts for a month.

“The Kingdom has clarified through its ongoing consultations with the US administration that all economic analyzes indicate that the postponement of the OPEC+ decision by one month, according to what has been suggested, would have had negative economic consequences” , the statement from the Saudi Foreign Ministry said.

The United States has accused Saudi Arabia of bowing to Moscow, which opposes a Western cap on the price of Russian oil in response to its invasion of Ukraine.

“We presented Saudi Arabia with an analysis showing that there was no market basis to cut production targets, and they could easily wait for the next OPEC meeting to see how things were evolving,” White House spokesman Jack Kirby said in a statement. added that other OPEC countries told the United States they felt “compelled” to support the Saudi move.

The statement from the Saudi Foreign Ministry, quoting an unnamed official, underlined the “purely economic context” of the oil cut. Oil demand has weakened around the world, with OPEC, the US Department of Energy and the International Energy Agency all lowering their 2023 demand forecasts this week.

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

The Saudi statement said the kingdom viewed its relationship with the United States as a “strategy” and stressed the importance of mutual respect. The Gulf Cooperation Council (GCC) issued a statement supporting Saudi Arabia’s comments praising the kingdom’s efforts to shield the market from volatility.

In research last week, Goldman Sachs said that in the past 25 years OPEC has never cut production while stocks in Organization for Economic Co-operation and Development countries – made up of 38 of the richest economies in the world – were so low. OECD stocks are currently 8% below their five-year average. However, they noted that OPEC cuts production during periods 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 Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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