Saudi Arabia & Russia Agree To Extend Oil Cuts

Saudi Arabia and Russia have agreed to continue cutting their oil production to boost prices on the global market. The announcement pushed the price of benchmark Brent crude up to $90 per barrel, the highest price since November last year. Riyadh and Moscow said they would decrease output to the equivalent of reducing global supply by 1.3 million barrels in a move likely to cause conflict between the Saudis and the US government.

Russia’s Deputy Prime Minister Alexander Novak said the Kremlin would continue its 300,000-a-day cut “aimed at strengthening the precautionary measures taken by OPEC+ countries to maintain stability and balance of oil markets.” The Saudi Press Agency said the country will continue to monitor the situation and take fast action if and when required.

The US has previously warned Saudi Arabia not to partner with Russia and not to cut oil supplies. Last October, President Biden said there would be “consequences” for such a move, but did not specify what these might be. The US and Saudi Arabia have had a tenuous relationship for decades – seen generally as an oil-for-security exchange. When the Obama administration began diplomatic relations with Iran, the Saudis felt the US was no longer committed to upholding the security end of the agreement.

Michael Stephens from the Royal United Services Institute in London said the fractures in the US-Saudi relationship are permanent.

Meanwhile, gas prices back home will place more pressure on the Biden administration as the country already struggles with inflation. On September 5, the national average for a gallon of gas was $3.811, the highest seasonal price for a decade. The rise is significant because September is usually a month during which gas prices go down, but the continued output reduction of Saudi Arabia and Russia has had a concerning impact.

The highest prices at the pumps are in California, Washington, and Hawaii, while the lowest are in Mississippi, Louisiana, and Alabama.