Shell-shocked investors are shifting their attention away from tariffs to the world’s most important commodity — crude oil.

The U.S. and China are locked in a brutal struggle on trade policy, but they agree on at least one thing: they’d like to see lower oil prices. President Trump recently declared as much, complaining in a tweet that “oil prices are too high.”

As the global economy falters and concerns grow over trade conflict and rising interest rates, the world’s two largest economies want oil producers to support growth by boosting oil supply.

Wall Street, erstwhile cheerleader for higher oil prices, is coming to see the wisdom of price moderation. A hike in OPEC production would represent a healthy tweaking, not a bearish reversal for oil.

High oil prices are undermining economic development in many countries, especially in emerging markets such as India. Cheaper crude would be the tonic that endangered economies need now.

Washington and Beijing seem likely to get their wish this week, courtesy of Riyadh and Moscow.

The S&P 500 and Nasdaq rose Wednesday, as investors shook off trade fears to focus on OPEC and economic positives. FAANG stocks powered the tech-heavy Nasdaq to a record high.

But trade anxieties haven’t disappeared and they continue to weigh on industrials. The Dow Jones Industrial Average closed lower today, marking its seventh straight loss.

Industrial giant General Electric (NYSE: GE) on Tuesday was removed from the Dow and replaced with drug store chain Walgreens Boots Alliance (NSDQ: WBA). GE today fell 0.31%, while WBA rose 5.25%.

West Texas Intermediate (WTI), the U.S. benchmark, today rose 1.03% to close at $65.57 per barrel. Brent North Sea crude, the international benchmark, fell 0.93% to close at $74.38/bbl.

OPEC meets Friday in Vienna to decide on oil production policy amid pressure from major consumers to open the spigots.

Higher oil prices have been a salve to the beleaguered energy sector, but they’re also raising prices for companies and consumers, dampening growth and stoking inflation. If inflation gets too hot, the Federal Reserve will be compelled to aggressively raise rates, which would clobber stocks.

The Saudis: glad about Vlad…

Saudi Arabia and non-OPEC member Russia, longtime antagonists, have gotten chummy lately. That rattles other countries in the Middle East but bodes well for Saudi interests and oil policy coherence.

OPEC leader Saudi Arabia still needs to bring recalcitrant members to heel. Iran on Tuesday vowed to oppose any deal to raise production.

What’s more, traditional Saudi allies within OPEC are getting nervous about the new closeness between the House of Saud and Russian President Vladimir Putin.

But ever the chess player, Putin seems to have outmaneuvered his Middle Eastern counterparts. The betting on Wall Street is that the Saudi-Russian stance of higher production will prevail.

Looming over these machinations is the ill-advised price war triggered by Saudi Arabia in 2014, a colossal blunder that still haunts energy producers.

To Saudi Arabia’s oil sheikhs, it seemed like a good idea at the time. Open the spigots to flood the world with cheap oil, pressuring rivals such as North America. Then, once competitors are prostrate, cut production to grab market share.

But wars, even those fought over price, often move in unintended directions. And the Saudi-instigated price war got way out of hand.

From its peak of about $112/bbl in mid-2014, oil crashed below $27/bbl in 2016. The protracted slump wreaked havoc with the treasuries of oil-producing nations. But low-cost shale producers not only survived, they thrived.

The U.S. has become the world’s number two oil producer. See chart, compiled with data from the U.S. Energy Information Administration (EIA):

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OPEC hadn’t counted on the ability of innovative North American shale producers to produce more oil at ever-cheaper production costs.

Facing an existential threat, Saudi Arabia twisted the arms of fellow OPEC members to sign an oil production curb in 2016. The agreement has stuck, without the usual cheating by members desperate for revenue. Global inventories have declined.

Despite bouts of volatility, oil prices have risen over the past 12 months (see EIA oil price chart):

(Click on image to enlarge)

Ahead of Friday’s meeting, Russia has proposed OPEC and non-OPEC partners raise output by 1.5 million barrels per day (bpd), essentially eliminating existing production cuts of 1.8 million bpd that have helped stabilize the market.

OPEC members Iran, Iraq, Venezuela, and Algeria have opposed a loosening of production cuts. These countries are cash-strapped and fear a plunge in oil prices.

The Saudi-Russian alliance is likely to win the day. Lower oil prices would provide a tailwind for the global economy, just when needed.

The disastrous G7 summit, the unraveling of the North American Free Trade Agreement, central bank tightening, escalating trade tensions — these factors have all weighed heavily on the stock market.

However, Wall Street expects levelheaded policy this week from the confab in Vienna. OPEC is an unlikely source of economic sanity, but these days, beleaguered investors will take sanity wherever they can find it.