According to Bloomberg News, the Organization of Petroleum Exporting Countries (OPEC) has succeeded in boosting oil prices through production cuts, but now OPEC is risking another victory by letting crude oil prices soar too high.
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In the first quarter of this year, OPEC and its allies joined forces to cut production, pushing oil prices back to more than $70 a barrel, the biggest increase in nearly a decade.
Saudi Arabia, OPEC’s strongest member, has made it clear that Saudi Arabia is determined to maintain tight supply in the global oil market. Saudi Arabia’s move is likely to repeat the scene of 2018, when production cuts pushed oil prices to a four-year high, triggering strong opposition from President Trump and a hasty reversal by Saudi Arabia.
“It seems that OPEC is over tightening the market,” said Ed Morse, head of commodities research at Citigroup in New York.
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Earlier this year, OPEC and its partners launched a new round of production cuts, when the rapid growth of U.S. shale oil production and the fragile growth of global demand seemed to lead to global oil oversupply. But because of OPEC’s production restrictions, coupled with further geopolitical squeezes on oil supply, the risk of global oil shortages has become greater.