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OPEC+ Oil Pumping Cut Brings Market ‘Stability’ and Busts Sanctions on Russia

By James Tweedie – Sputnik – 04.04.2023

OPEC’s cut in production has undermined US-led attempts to cap the export price of Russian oil. Geopolitical analyst Mohammed Alhamed, president of the Saudi Elite group and economist, and Professor Mark Frost said the US should back off and let market forces rule.

OPEC’s latest crude oil production cut will stabilize the world market while foiling US-led attempts to impose “price cap” sanctions on Russian exports.

OPEC+, which includes the organization’s 13 member states plus 11 others, including Russia, announced a 1.66 million barrel-per-day cut in production on Monday, sending the price of crude soaring on international markets.

Russia’s deputy prime minister said Moscow may also extend its 500,000 barrel-per-day production cut until the end of this year.

The US, UK, European Union, and Japan agreed earlier this year on a $60-per-barrel price limit on Russian crude, with a $100 cap on refined gasoline and diesel and $45 on household fuel oil as part of sanctions over Russia’s military operation in Ukraine. Moscow warned that those measures would have negative consequences.

Mohammed Alhamed told Sputnik that while the US had called the production cut “ill-advised,” OPEC+ had been “instrumental in bringing stability and transparency to the oil market, which has benefited the world economy while many American banks are facing bankruptcy.”

He said threats by US congressmen and women to ban weapons sales to Saudi Arabia over the previous oil production cut were “likely seen as a stupid idea” which would “reflect negatively on US interests in the Middle East.”

“A strained relationship with the US could have negative repercussions on both countries” the analyst said, cautioning Washington not to interfere in OPEC+, which “operates independently and has the right to make decisions that benefit its members.”

The US, still a major oil producer itself, should “focus on addressing its own oil and climate change agenda before criticizing other countries,” Alhamed said.

“Saudi Arabia and OPEC+ have made significant efforts to bring stability to the oil market and should be commended for their efforts.”

Professor Mark Frost told Sputnik that the production cut was a “signal” to the US that “you’re taking us for granted.”

He noted that in “any cartel, there’s a strong incentive to cheat” — and that the rising price of oil would allow European countries to pay prices above the Western-imposed cap on seaborne crude shipments from Russia.

“I think somebody got on the phone and said, ‘hey, Biden, we’re going to buy some oil. And if you don’t like it, that’s tough,’” Frost said.

“You can’t have volatile inflation forever. Markets start to shut down. People start to lose faith,” he added. “People start to become risk averse, and at the extreme, the risk is we become Japan in the nineties, where it requires negative interest rates to get people to borrow any money.”

Frost pointed to fast-food chain McDonald’s announcement of mass lay-offs, saying: “That’s a leading indicator because whether people like it or not, capitalism is trickle-down economics.”

The academic said that the rampant inflation caused by sanctions on Russia — one of the world’s biggest food as well as energy producers — combined with the US Federal Reserve raising interest rates in “quantitative tightening” in response means “we’re going to see at least two million people directly starve to death.”

“A lot of people don’t realize a lot of the world doesn’t do that well,” Frost stressed. “And relatively small increases in crucial things like rice, cooking oil and things like that causes people to starve to death.”

April 4, 2023 - Posted by | Economics | , , ,

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