“Not a big deal,” said Rusty Braziel, executive chairman of RBN Energy, another consulting firm in Houston. However, he added, “the OPEC Plus cuts will certainly impact the market, just by the signal it sends that OPEC Plus is ready to cut production to keep oil prices from falling.”
Rising prices in the oil market have become familiar in recent years.
During the 2008-9 financial crisis, prices fell to $35 per barrel from $145 in just 5 months. In 2014-15, when economic growth slowed, oil fell more than 50% in nine months, to $45 a barrel. Prices rose again until the Covid-19 pandemic hit, when demand fell. Within hours, they quickly fell below zero from $18, as producers were forced to pay buyers for oil they had no room to stock.
With their economies at stake, Saudi Arabia and its allies have aimed to stabilize markets as the world slowly recovers from the pandemic. After cutting production by nearly 10 million bpd during the pandemic, OPEC Plus gradually restored output until last month, when announced a small reduction.
“OPEC Plus wants an oil price of $100,” said Scott Sheffield, chief executive officer of Pioneer Natural Resources, a major Texas oil company. Mr Sheffield predicts that oil will stabilize at $90-100 a barrel and stay there for the long term if a slowing economy causes demand to drop. “There will be a small increase in the pump,” he said.
After reports of potential OPEC Plus production cuts made headlines over the weekend, West Texas Intermediate prices, the US standard, rose 5 percent on Monday and another 2 percent on Tuesday, but still at around $85, roughly the same level as a few weeks before the invasion of Ukraine. Brent crude, the global standard, is around $90.
According to auto club AAA, the average price of a gallon of regular gasoline has dropped to $3.80 from more than $5 on June 14, although it has risen slightly in recent days.
For much of this year, the Biden administration, with limited success, urged the Persian Gulf countries to pump more. While Mr. Biden pushed pump prices lower, Saudis are more concerned that prices are falling too low and that global spare capacity is insufficient at a time of global uncertainty.
