MbS sends Biden jarring teams note

Saudi Arabia's newly designated Prime Minister, Mohammed bin Salman speaks during his meeting in the Ministry of Defence in Jeddah, Saudi Arabia, September 27, 2022. Saudi Press Agency/Handout

LONDON, Oct 5 (Reuters Breakingviews) - Right now, the oil market is all about teams. There’s the so-called OPEC+ team, including major crude producers like Saudi Arabia, United Arab Emirates and Russia. And there’s the G7 team of major consumers including the United States, which has put together a bold plan to cap the revenue Moscow gets from oil in response to the latter’s invasion of Ukraine.

Some are playing both sides. Saudi Arabia’s Crown Prince Mohammed bin Salman offered up a slight increase in production when U.S. President Joe Biden came to entreat him for help with crude prices above $90 a barrel this summer. Yet on Wednesday, MbS and a coalition of the Organization of the Petroleum Exporting Countries plus Russia said they will actually now cut 2 million barrels per day from targeted production read more . All things being equal, that would push prices up – notching up a point for the producers’ team, and losing a point for the consumers.

OPEC+ is not actually hitting its baseline anyway, so the practical impact on prices may not greatly exceed the 11% jump in Brent crude since Sept. 26. The wider significance is more disturbing for the consumers’ club. A risk to the U.S.-led price cap was always that Russia might cut supplies to G7 countries and thus increase the prices they pay read more . In such a situation, it would have been handy if Biden could lean on Riyadh to offset this by pumping more, as his predecessors have often managed to do. Sadly, the OPEC+ cut suggests MbS isn’t obviously on Biden’s team after all. (By George Hay)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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Editing by John Foley and Sharon Lam

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