Oil prices have been dropping steadily, more than Saudi Arabia is willing to accept. Riyadh has other goals in mind, which do not include cooperation with the West.
Oil investors should expect to “ouch” next week, according to Saudi Arabia’s oil minister Prince Abdulaziz bin Salman. The Prince used this interesting line of words at the latest Qatar Economic Forum, ahead of next week’s meeting of the Organization of Petroleum Exporting Countries (OPEC).
Oil prices have consistently dropped in the last months, nearing $76 per barrel in May. This goes against OPEC’s strategy of slashing oil production to increase prices, hence why the organization might implement another cut during the next meeting.
OPEC is essentially controlled by Saudi Arabia, the largest oil exporter in the world. And, as Bloomberg noted, “While several delegates have said there’s no need for further action now as curbs already in place will help tighten global markets, Prince Abdulaziz has been known for orchestrating surprise interventions.”
Saudi Arabia’s geopolitical position is quickly switching against the United States and the global West. Until a few years ago, Saudi Arabia was one of Washington’s most important partners in the Middle East. Since then, however, Saudi de facto ruler Mohammad bin Salman (MBS) has looked for other opportunities.
The Russian invasion of Ukraine provided him with one. Suddenly, Saudi oil was far more attractive to the West, and MBS was going to make them pay for it.
Sino-Russian-Saudi alliance
A few months after Russian troops entered into Ukraine, Saudi Arabia and OPEC started slashing oil production, worsening the ongoing energy crisis. This move was done in coordination with Moscow, which was in desperate need of oil buyers.
Russia found a new market in the East, with China and India very willing to support Moscow’s illegal invasion by purchasing cheap oil and gas. The two Asian giants need Russian fossil fuel to support their huge industrialization effort.
Meanwhile, China was also brokering deals in the Middle East, trying to secure Saudi oil at a good price while also cutting supplies for the West. Currently, Beijing and Riyadh are in talks to trade oil in Chinese yuan instead of US dollars. If the deal falls through, the power of the dollar as the global reserve currency would seriously start to be questioned.
China also moderated diplomatic talks between Saudi Arabia and Iran, historical enemies whose rivalry has always been exploited by Washington. And, crucially, both Saudi Arabia and Iran are loaded with oil.
Essentially, an “oil alliance” against the United States is being formed, and next week’s slash in supplies will just be another step towards it. The West will need further energy independence to stay alive.
