The geopolitics of oil

The unexpected announcement by the Organization of the Petroleum Producing Countries (OPEC) and its partners, led by Russia, to reduce its crude supply by more than one million barrels starting in May represents a double blow to the aspirations of the western powers.

On the one hand, it opens the door to a rise in the price of crude oil in the second half of the year, just now that inflation was beginning to moderate its upward trend of last year.

On the other, it ratifies the strong tensions between the United States and Saudi Arabia, which is strengthening its alliance with Russia and doing so amid a growing rapprochement with China.

The announcement of the cut in oil production has reversed the downward trend in crude oil prices, which are now above 84 dollars in the case of a barrel of Brent (a reference in Europe) after the invasion Russian Russian from Ukraine managed to shoot the price above 120 dollars last summer.

Before the announcement, the International Energy Agency already estimated that there would be an oil supply deficit in the second half of the year of between 1 and 1.5 million barrels, which will only worsen.

In fact, OPEC+ agreed last October to reduce its supply of two million barrels, despite the express call by US President Joe Biden not to do so.

If the recent rise in prices continues, the increase in the price of crude oil will end up affecting the sectors most exposed to the cost of fuel, such as agriculture, transport or tourism, and sooner or later it will translate into additional problems for controlling inflation. .

After the recent episodes of crises in the banking sector and their impact on credit restrictions, the conflict between price stability and financial stability is becoming more complicated for central banks.

The decision demonstrates, in turn, that the relationship between the Biden Administration and Saudi Crown Prince Mohamed bin Salmán remains tense.

Amid Western efforts to cap the price of Russian oil, thus stifling Moscow's main avenue of revenue and thereby financing the invasion of Ukraine, the decision to cut global oil production represents a major support for the Russian position, which is managing to circumvent a good part of the sanctions imposed by the G-7 and the European Union.

Meanwhile, the Saudi oil company Aramco has just announced new supply agreements to China and the purchase of a stake in a Chinese refinery, making it a preferred partner of the Desert Kingdom.