Business Maverick: OPEC Gambles With Success of Production Cuts as $80 Oil Looms

In the first quarter, coordinated production curbs by the Organization of Petroleum Exporting Countries and its allies helped oil rally the most in almost a decade, restoring prices to over $70 a barrel.

OPEC and its partners launched a new round of output cuts at the beginning of the year when it looked like booming U.S. shale-oil production and fragile global demand growth would lead to a supply surplus. But as the group implements the curbs, and as supplies are squeezed further by crises in Venezuela and Iran, there’s now a greater risk of a shortage.

“There’s no doubt that in a scenario where Brent crude heads to $80, President Trump will voice his concern,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. Saudi Arabia faces powerful domestic pressures to press on with the policy, from Crown Prince Mohammad Bin Salman’s plans for radical economic transformation to a government budget that hinges on oil prices of $80 a barrel.In April 2018, when oil was trading at about $70, the Saudis signaled at an OPEC gathering in Jeddah they were comfortable allowing crude to climb even higher.

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