The oil cartel Opec is causing turbulence on the capital markets with its surprising cut in production.
(Photo: Reuters)
The ministerial meeting of the oil cartel Opec plus was only scheduled for Monday. But that’s not the only reason why the cut in production volumes by 1.7 million barrels a day announced on Sunday afternoon came as a complete surprise. It is no exaggeration to say that the markets were shocked, as the vast majority of experts had expected the cartel to leave oil supplies unchanged.
The cut sends a message that is as clear as it is uncomfortable for the West: Opec will not tolerate a slide in oil prices. No matter what economic, social or political consequences a capping of production volumes has. And those consequences are far-reaching.
The price of oil not only influences energy costs, but also uses this lever to influence growth prospects and inflation, and thus also monetary policy. In short, the subsidy cut means that key interest rates will possibly rise longer than previously expected.
Not only would that make a recession in the US and Europe more likely, but it would also be bad news for the stability of the financial system. The past few weeks have shown how dangerous the side effects of the turnaround in interest rates can be for banks.
No less worrying is the political dimension of the Opec decision. From the US government’s point of view, the fact that Saudi Arabia, together with Russia, is driving up the oil price is a diplomatic affront.
>>Read here: Opec plus shocks the markets – oil prices could rise towards $100
This was already evident in the last cut in October, which was particularly painful for US President Joe Biden because he had recently personally campaigned in Riyadh for lavish oil production. The repetition of this affront shows that the strategic ties to the United States are no longer sacrosanct for the Saudis.
And that’s bad news for geopolitical stability, no matter how you assess the regime in Riyadh.
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