US not expecting Saudi Arabia to immediately boost oil production

Washington is eager to see OPEC pump more oil to help bring down high cost of petrol



Reuters
Reuters

By Reuters

Published: Fri 15 Jul 2022, 6:56 PM

The United States is not expecting Saudi Arabia to immediately boost oil production and is eyeing the outcome of the next OPEC+ meeting on Aug. 3, the US national security adviser said on Friday, lowering expectations as US President Joe Biden visits the kingdom.

"I don't think you should expect a particular announcement here bilaterally because we believe any further action taken to ensure that there is sufficient energy to protect the health of the global economy, it will be done in the context of OPEC+," Jake Sullivan said.

Biden is set to land in Jeddah on Friday on a trip that is designed to reset the US relationship with the kingdom and during which energy supply, human rights and security cooperation are on the agenda.

Still, the US could secure a commitment that OPEC will boost production in the months ahead in hopes that it will provide a signal to the market that supplies are coming if necessary.

Saudi Arabia, alongside the UAE, holds the bulk of spare capacity within the OPEC+ group, an alliance between the Organization of Petroleum Exporting Countries (OPEC)and other exporters most notably Russia. Biden is expected to have direct meetings with Saudi and UAE heads of state during his trip.

But the kingdom has repeatedly indicated it would not act unilaterally.

Brent crude prices are trading at just under $100 a barrel, having hit a 14-year high of $139.13 in March, as investors weigh new Covid-19 lockdowns in top importer China and recession fears.

"Saudi Arabia prefers to manage the market through the Organization of the Petroleum Exporting Countries and allied producers (OPEC+), not through unilateral moves," Ben Cahill, a senior fellow at the Center for Strategic and International Studies, wrote in a recent analyst note.

"Saudi energy minister Abdulaziz bin Salman has consistently emphasized the importance of OPEC+ cohesion, including a central role for Russia," he said.

"The UAE is very much pro supporting and following U.S. discussions with Saudi Arabia on oil because we are part of the greater OPEC group, OPEC+, so we would very much like to see more stability in the market and ability to produce more and we are going to follow where the group will follow," he said.

The US is eager to see Saudi Arabia and its OPEC partners pump more oil to help bring down the high cost of petrol and ease the highest US inflation in four decades.

"The decision to increase oil production is subject to several factors and considerations and does not depend on a US request," Abdulaziz Sager, Chairman of the Riyadh-based Gulf Research Center, said.

"There are technical, political and economic complications related to that decision."

Spare capacity within OPEC is running low, with most producers pumping at maximum capacity. It is unclear how much extra Saudi Arabia could bring to the market and how quickly.

OPEC+ decided last month to increase output targets by 648,000 barrels per day (bpd) in August, ending record production cuts that it brought at the height of the pandemic to counter collapsing demand.


More news from Americas