The Saudis will have a say in U.S. elections
- Ben Geman, author of Axios Generate
Saudi Arabia's extension of oil production cuts until the end of 2023 or longer helps ensure energy prices will become an election 2024 debate.
Why it matters: U.S. gasoline prices, which have been on the rise, are closely tethered to global oil prices. Meanwhile, the presidential campaign season is heating up — and voters already give the White House low marks on the economy.
- If sustained, "crude price strength could weigh on President Joe Biden's re-election bid," ClearView Energy Partners said in a note.
Catch up fast: The kingdom said Tuesday morning it's keeping the current reduction of 1 million barrels per day in place for another three months, subject to monthly review.
- Russia, meanwhile, extended its 300,000 bpd export cut for the same time.
Driving the news: Tuesday's news helped push Brent crude prices above $90 per barrel (see above), their highest since November 2022.
What they're saying: "These bullish moves significantly tighten the global oil market and can only result in one thing: higher oil prices worldwide," Rystad Energy analyst Jorge Leon said in a note.
State of play: U.S. gasoline prices are averaging a little over $3.80 per gallon. Although far below 2022 peaks around $5 per gallon, it's enough to create pain for consumers and a line of attack for Biden's GOP opponents (which happened in the first debate — even though they're far below 2022 peaks).
The intrigue: While the White House has bashed some previous Saudi cuts, officials held their fire this time.
- "I would point out that what was announced today was a continuation of an existing [Saudi] policy," national security adviser Jake Sullivan told reporters.
- He added that Biden's "just trying to do everything within his toolkit" to lower prices.
Between the lines: Earlier in the day, ClearView said the lack of open criticism "might reflect the broader White House goal of normalizing relations between Israel and Saudi Arabia."
The bottom line: Markets and politics are never far apart.