By Mitchell Hartman
Of the 2 million barrels a day OPEC+ members are promising to cut, at least half would come from the Saudis. That would put a significant dent in global oil supply, said Columbia Business School climate economist Gernot Wagner.
“This is the Saudis throwing their weight around, to basically say: ‘While you over there in Dubai might be talking climate, look at us over here — more important to global energy markets,’” Wagner said.
So far, the impact hasn’t amounted to much. On Thursday, Brent crude was trading well below the Saudis’ target price.
“The market is just saying, ‘Well, I don’t really think that your cut will be as impactful as needed to be able to preserve these prices,’” said Elina Ribakova, a senior fellow at the Peterson Institute for International Economics.
“We have historically had this problem, where Saudi would take the lead on the cuts, and then others would be much more iffy, or much less committed to the cuts,” Ribakova said.
Meanwhile, cutting global oil supply may be less effective than it used to be in raising prices, said Gernot Wagner. That’s because oil demand is faltering as renewable energy replaces fossil fuels in parts of the world.
“China’s oil demand is peaking much faster than anticipated because of this amazing increase in EVs, putting a downward pressure on oil prices,” Wagner said.
Quoted in: “OPEC+ members say they’ll cut oil production. Global markets don’t seem to believe them” by Mitchell Hartman, Marketplace (30 November 2023).