What the SPR release means for OPEC+

Fundamentally, Colgan sees the SPR release as “a reflection of the strained relationship between the US and Saudi Arabia.” In previous years, says Colgan, the US may have been able to ask the Saudis to pump a bit more oil to stabilize the market. Given current tensions between the two countries over human rights issues such as the killing of journalist Jamal Khashoggi and Saudi Arabia’s role in Yemen, though, country officials haven’t been as inclined to cooperate as the US struggles with high gas prices.

OPEC+ delegates have said the SPR release is not justified given current market conditions and may reassess plans to increase oil production next month in light of the US strategic release, according to an S&P Global analysis.

Colgan says the response to the strategic release won’t be driven so much by OPEC+—which only has so much power over its member states—but rather by major oil exporting countries within the body. He said he expects Saudi Arabia to weigh short-term profits against the tensions put on consumer country economies when deciding how to respond. Russia, the other top oil exporting country after Saudi Arabia, is unlikely to be swayed by US pressure, Colgan adds.

“Ultimately the oil-producing countries want us to stay addicted to oil, so they don’t want to price to be too high,” Colgan says. “But at the moment I think they’ve sent repeated signals that they’re comfortable with prices in this range. So they may not back down.”

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