When crude surges above $90 a barrel and the leaders of Saudi Arabia and Russia get on the phone to congratulate each other on a job well done, oil consumers should take note.
After half a year in the doldrums, the price of the world’s most important commodity is on a tear as the biggest players in OPEC+ get serious about making sure supply doesn’t exceed demand. The 1 million barrel-a-day output cut the Saudis initially pledged solely for the month of July will now be in place until year-end, alongside a smaller export reduction from Russia.
It’s not just the size of the supply deficit likely to result from this — about 2.7 million barrels a day in the fourth quarter according to Rystad Energy A/S — that should worry consumers. It’s the fact that the West’s somewhat-estranged ally Riyadh, and its outright foe Moscow, are now bound so firmly together in their push for higher prices.
“Crude tightness seems quite legitimate and quite real,” said Greg Sharenow, managing director at Pacific Investment Management Co. “This certainly keeps oil markets on the boil.”
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