London Daily

Focus on the big picture.
Tuesday, Sep 16, 2025

OPEC+ oil production cuts are a surprise move - so what are the factors at play?

OPEC+ oil production cuts are a surprise move - so what are the factors at play?

From dissatisfaction at the price of oil to geopolitics and the need for economic protection, there are a number of factors involved in the surprise announcement.

The surprise production cuts announced by OPEC+ at the weekend appear to have been motivated by a number of factors.

The most obvious is that OPEC+ is clearly unhappy with the price at which oil has been trading. Brent crude has been below $90 a barrel since mid-November and, during the last few weeks, has gone as low as $70.12.

The Saudis in particular appear unhappy that crude has been trading broadly within a band of $70 to $80 a barrel and presumably would like to set a floor in the price at the upper end of that range.

The kingdom's de facto ruler, Crown Prince Mohammed bin Salman, is investing billions of dollars in Vision 2030, his strategic plan to diversify the Saudi economy away from energy, which includes building a new mega-city in the desert and opening the country to tourists and cultural visitors. That programme requires oil prices to remain at a certain level.

Protection from an economic downturn

A second motivation could be that OPEC+ is seeking to protect itself from a possible economic downturn. Those fears will have intensified during the recent turmoil in the banking markets to which, ironically, the Saudis themselves contributed.

The state-controlled Saudi National Bank was the biggest single shareholder in Credit Suisse. Comments from its chairman (who has since been replaced) that it would not be participating in any equity fundraising contributed to the loss of confidence in Switzerland's second-largest lender.

It is perhaps no coincidence that the recent dip in the price of Brent crude - to its lowest level since December 2021 - came the morning after the rescue of Credit Suisse by its domestic rival UBS had been announced by the Swiss government.

So this may, as Jeff Currie, the head of commodity research at Goldman Sachs, suggested today, have been a precautionary move.

Saudi irritation

A third factor is almost certainly likely to be Saudi irritation at recent comments from the Biden administration. The US has been drawing down crude from its Strategic Petroleum Reserve (SPR) - an emergency reserve created in 1975 in the wake of the energy crisis sparked by the Yom Kippur War in October 1973 - to mitigate the impact of higher crude prices on American households and businesses.

The Biden administration had previously promised the Saudis it would replenish the SPR, but said last week it would now not be doing so. That will have angered the Saudis, who will also be keen to use this incident as an opportunity to remind the US of its pricing power in the crude market, something which has at various times during the last decade appeared to be threatened by US shale producers.

A continuing trend between the US and Saudi Arabia

A fourth, related, factor is geopolitics. It is being suggested in some quarters that the Saudis wish to reinforce to the White House that the US is not as influential a player in the Gulf region and the Middle East as it has been in the past. Riyadh, traditionally a staunch security partner of the US in the region, has been making increasingly clear its desire to form a wider group of partners.

Nowhere was this emphasised more strongly than in the recent diplomatic agreement reached with Iran, traditionally the kingdom's arch-rival, which was brokered by China. Beijing will have enjoyed watching the kingdom cocking a snook at Mr Biden.

This can be seen as the continuation of a trend: Mr Biden had been critical of Riyadh even before he was elected president and is under pressure from many in his party to dial down the relationship with the Saudis even to the point of withholding arms sales.
A fist bump between US President Joe Biden and Saudi Crown Prince Mohammed bin Salman


Mr Biden sought to patch things up with a visit to the kingdom in July last year, during which he greeted Crown Prince Mohammed with a fist bump - only for OPEC to push through a production cut of two million barrels per day in October. This was a measure Mr Biden said would have "consequences". So this may be another indication from Riyadh that it has not forgiven, or forgotten, those remarks.

The Saudis are calling the shots


What is not clear is the extent to which Russia - which is not a member of OPEC but is a part of the broader OPEC+ grouping - has had any say in the decision. The Saudis are shouldering the bulk of the production cuts, along with the UAE, Kuwait and Iraq, while Russia's involvement appears to extend to merely keeping in place an existing half a million barrels per day production cut until the end of the year. Moscow stressed on Sunday night that this was a voluntary decision - but very evidently the Saudis are calling the shots in the cartel.

The consequences of this move are clear, though. The most unwelcome one could be a boost to Vladimir Putin's war effort: it is being suggested that less Saudi crude on the market could push the likes of India and China to buy even more Russian crude. The Indians have already indicated as much.

Another is that this production cut will leave global demand and supply out of kilter for the second half of the year. Both Goldman and JP Morgan are now forecasting that crude could trade at $90 a barrel between now and the end of the year. UBS, meanwhile, thinks prices could go to $100.

That will make life harder for central banks around the world that are grappling with the consequences of higher inflation.

This action, then, has increased the danger of interest rates in the UK, Europe and the United States having to remain higher for longer - with all the consequences for global GDP growth that entails.

Newsletter

Related Articles

0:00
0:00
Close
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
×