“It’s not yet a new oil shock, but it’s a warning shot”


At a gas station in Riyadh, Saudi Arabia, March 28, 2023.

HASfter the spring of anger, peppered with demonstrations, the summer was a strange mixture of furnace, deluge and holiday idleness. Does the fall start announce a “winter of discontent” ? The Anglo-Saxons are always ready to draw Shakespeare (Richard III) to anticipate the difficulties that await us.

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This is likely to be the case again, especially on the side of gas pumps in the coming months. With a certain sense of timing, Saudi Arabia and Russia simultaneously warned on Tuesday, September 5, that they were going to maintain until the end of the year the reductions in oil production initiated since the summer.

In total, they intend to withdraw from the market 1.3 million barrels per day. This does not prevent other producers from filling this gap, but it still represents 10% of Saudi Arabia’s maximum capacity. For Riyadh, it is about bringing “stability and balance” to the markets. In other words, to prevent any drop in prices despite the gloomy economic situation that is taking hold, particularly in China.

Act on prices

The markets picked up on the message and immediately propelled the price of crude oil (Brent) to more than 90 dollars (84 euros). It was only $78 in mid-July. This is not yet another oil shock, but it is a warning shot. Firstly because it shows the ability of these two countries, world oil champions, to influence prices, and secondly because the economic repercussions will be multiple.

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In the first place on fuel consumers, motorists or industrialists, who will see energy bills go up. Enough to act on inflation, which was just beginning to calm down. This will not reure central banks, which must decide whether or not to raise rates again in the coming weeks.

Many analysts expected a relative pause in the United States in view of the sharp drop in price increases in recent months. It could be different if the energy bill increases and is ped on to prices by the manufacturers concerned.

All-out offensive

This prospect of a Shakespearean winter does not please Joe Biden at all, one year from the presidential election. He had however warned the Saudi leader, Mohammed Ben Salman. The latter does not care and visibly prefers the company of Vladimir Putin to that of the American president. These two would be very happy if Donald Trump returned to power and ended American aid to Ukraine.

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