Oct. 12 (UPI) — Oil prices, a key factor in inflation, were on Wednesday moving away from recent highs triggered by OPEC+ production considerations, though the White House says it is frustrated that allies in the group seem to be padding Russia’s war chest with bullish decisions.
“We need to kind of reassess and have a different relationship with Saudi Arabia, especially after the decision that was made by OPEC+,” White House press secretary Karine Jean-Pierre told reporters Tuesday.
U.S. President Joe Biden traveled to Saudi Arabia in July ostensibly with hopes the oil-rich kingdom would open the spigot to arrest inflation that has risen steadily on the back of higher crude oil prices.
Saudi Arabia is the de facto head of the Organization of the Petroleum Exporting Countries, but it counts Russia as an important member in the broader OPEC+ group, which includes non-member states as allies. Facing severe economic pressure from its war in Ukraine, considerations for deep cuts to the group’s production quotas allegedly came straight from the Kremlin.
For October, OPEC+ opted to adjust their quotas lower by 100,000 barrels per day. But for November, the group agreed to a whopping 2 million bpd adjustment, a move that sent shock waves through the global market.
OPEC+ made its move on Oct. 5. and Brent crude oil, the global benchmark for the price of oil, gained nearly 7% between then and Friday to close last week at $97.92 per barrel. It was closer to $92 per barrel in mid-day trading Wednesday. While on the decline, the price is still far above where it ended September — at $87.96 per barrel.
Jean-Pierre said that when OPEC+ made that decision, it seemed to have aligned its policies with Russia, which can pad its war chest with the oil revenue that comes from higher prices. This strikes a direct blow to U.S. constituents struggling with elevated consumer prices and further underscores the need to “reevaluate that relationship with Saudi Arabia,” she said.
Biden and his fellow Democrats have spent much of the last week lashing out at Saudi Arabia for the decision. Congressional Democrats drafted legislation last week that would end U.S. military support for Middle East allies. This week, Sen. Bob Menendez, D-N.J., the head of the Senate foreign relations committee doubled down on calls for a rethink of the U.S. strategic posture in the region.
“There’s going to be some consequences for what they’ve done with Russia,” President Biden told CNN, referring to Saudi Arabia.
Oil ministers in the group said they were working on the assumption that a weakening economy would lead to lower demand, but prices remain stubbornly high. A reading of wholesale prices in the U.S economy showed general inflationary pressures remain entrenched despite early sentiment that the increase in prices would be transitory.
Brent crude oil prices are expected to drift into the $100-range during the fourth quarter.
