https://www.semafor.com/newsletter/12/06/2024/opec-is-gearing-up-for-a-game-of-chicken-with-trump
By Tim McDonnell
The OPEC+ group of major oil producing countries held off on raising production quotas until at least April, setting up a showdown with President-elect Donald Trump over his plans to boost US drilling.
Thursday’s decision was the third time since June that OPEC+ has postponed a planned production increase — it is currently refusing to pump as much as 6% of global oil demand — a sign that the group still sees no way to put more oil on the market without cratering the price, as demand in China and other major importers remains tepid. OPEC’s hesitancy is a bad sign for Trump. If the oil price is too low for OPEC, it’s definitely too low for US producers. But when Trump returns to office, he’ll find himself in a high-stakes game of chicken with OPEC. The grouping’s production cuts help Trump, because they keep the price elevated to a point that US producers can turn a profit at; more than any action the president can take, it’s the price that determines whether “drill, baby, drill” happens or not. But the group’s leaders know this, of course, and could be running out of stamina to maintain cuts that increasingly threaten to spark an exodus of smaller members, further weakening the cartel’s influence in the global market.
“Nobody wants a price war,” said Jim Krane, co-director of the Middle East Energy Roundtable at Rice University. “But OPEC won’t be content forever to watch its market share frittered away in small increments.”
