Saudi Arabia, the de facto leader of the oil cartel, has been facing demands from President Donald Trump to prop up the global economy by maintaining current outputs to keep supply high and oil prices low. Furthermore, the output reduction would provide support to Iran by raising the price of oil amid Washington D.C.’s bid to squeeze the economy of OPEC’s third-largest producer under its new sanctions.
“U.S. political pressure is clearly a dominant factor at this OPEC meeting, limiting the scope of Saudi actions to rebalance the market,” Gary Ross, chief executive of Black Gold Investors and a veteran OPEC watcher, told Reuters.
The markets reacted positively to the production cuts after earlier talks dragged on when Saudi Arabia and Russia disagreed over who would shoulder the production cuts to stem the 30% decline in oil prices. Many did not price in any production cuts, which began at the start of the year.
“There was a huge glut of oil in November, thanks to the ramp up in production by Russia, the U.S. and Saudi Arabia ahead of the Iran debacle,” Matt Badiali, a senior research analyst at Banyan Hill Research specializing in oil and commodities, told MarketWatch.
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