U.S. and Saudi Arabia on Collision Course Over Oil Cuts

The United States and Saudi Arabia appear to be once again on a collision course after the Middle Eastern country and other members of the Organization of the Petroleum Exporting Countries (OPEC+) announced surprising cuts to its oil supply on Sunday, in a move that aims to boost oil prices amid fears of weakened demand.

According to the initiative, which was announced outside a formal OPEC+ meeting, Saudi Arabia and the other OPEC+ oil producers—which include Russia—will slash output supply by a total of around 1.16 million barrels per day (bpd) in a series of voluntary cuts that will start from May and last until the end of the year.

The decision strikes a new blow to the souring relationship between the U.S. and Saudi Arabia, which has seen the Middle East nation moving closer to Russia and China under the Biden administration. Last month, China brokered a deal between Saudi Arabia and Iran aimed at restoring relations between the two countries.

The U.S., which had already condemned the OPEC+ decision last year to cut production of 2 million bpd last November, has strongly opposed further cuts to the OPEC+ oil production, calling the rise in prices expected to follow inadvisable.

"We don't think cuts are advisable at this moment given market uncertainty—and we've made that clear," a spokesperson for the National Security Council said, Reuters reported. "We're focused on prices for American consumers, not barrels, and prices have come down significantly since last year, more than $1.50 per gallon from their peak last summer. We will continue to work with all producers and consumers to ensure energy markets support economic growth and lower prices for American consumers."

Last year, after Saudi Arabia decided to cut production against calls from the U.S. to pump more oil into the market in a bid to fight rampant inflation, the White House accused the country of siding with Russia, which invaded Ukraine last February, and trying to trigger an energy crisis in Europe, warning the country that there will be consequences for their decision.

As analysts expected, the news that Saudi Arabia and the other OPEC+ oil producers will slash output has caused an immediate jump in prices. On Monday, Brent oil futures jumped $4.30 to $84.19 a barrel, while U.S. crude surged $4.17 to $79.84, Al Jazeera reported.

The announced cuts have somewhat overshadowed the slower reading of core inflation reported by the Federal Reserve last Friday. According to the Fed's latest data, prices in the U.S. in February were 6 percent higher than a year ago, down from an annual rate of 6.4 percent in January and the 9.1 percent peak of inflation reached last June.

For OPEC+, which includes the world's largest oil producers, the move is necessary to stabilize the oil market, which has seen prices fall towards $70 a barrel last month—the lowest in 15 months. However, the price of crude oil had recovered to just below $80 a barrel in the past week, leading many to think that OPEC+ would not have to cut production.

Saudi Arabia will cut output by 500,000 bpd, Iraq will reduce it by 211,000 bpd, the United Arab Emirates by 144,000 bpd, Kuwait by 128,000, Oman by 40,000 bpd, Algeria by 48,000 bpd, and Kazakhstan by 78,000 bpd, according to Reuters. Russia, according to the country's Deputy Prime Minister Alexander Novak, would extend its voluntary cut of 500,000 bpd—first announced in March in retaliation for Western countries' imposing a price cap on its oil exports—until the end of the year.

Newsweek has emailed the White House's press team for comment.