Production

US does not expect Saudi Arabia to increase oil production immediately

A model of 3D-printed oil barrels is seen in front of the falling stock market chart in this illustration taken December 1, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

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  • Comments ahead of Biden’s visit to the kingdom
  • Saudi Arabia and the United Arab Emirates hold most of the spare capacity in OPEC
  • US keen on more oil to ease high gas cost and inflation

JEDDAH, Saudi Arabia, July 15 (Reuters) – The United States does not expect Saudi Arabia to immediately increase oil production and is monitoring the results of the next OPEC+ meeting on August 3, said a US official told Reuters on Friday, lowering expectations ahead of US President Joe Biden’s visits.

Biden is expected to land in Jeddah later Friday on a trip meant to reset US relations with the kingdom and in which energy supply, human rights and security cooperation are the order of the day. day. Read more

Still, the United States could secure a commitment that OPEC will ramp up production in the coming months in hopes it will send a signal to the market that supplies are coming if needed.

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Saudi Arabia, alongside the United Arab Emirates, holds most of the spare capacity in the OPEC+ group, an alliance between the Organization of the Petroleum Exporting Countries (OPEC) and other exporters, including Russia. Biden is expected to have face-to-face meetings with Saudi and Emirati heads of state during his trip.

But the kingdom has repeatedly indicated that it will not act unilaterally.

Brent crude prices are trading at just under $100 a barrel, after hitting a 14-year high of $139.13 in March, as investors weigh in on new COVID-19 lockdowns in the major importer China and fears of recession.

“Saudi Arabia prefers to manage the market through the Organization of the Petroleum Exporting Countries and Allied Producers (OPEC+), not through unilateral measures,” wrote Ben Cahill, senior researcher at the Center for strategic and international, in a recent analyst note. .

“Saudi Energy Minister Abdulaziz bin Salman has consistently stressed the importance of OPEC+ cohesion, including a central role for Russia,” he said.

Anwar Gargash, diplomatic adviser to UAE President Sheikh Mohammed bin Zayed, also said Friday that his country wants a more stable oil market and will respect OPEC+ decisions. Read more

“The UAE is very supportive of supporting and following up on US talks with Saudi Arabia on oil because we are part of the OPEC major group, OPEC+, so we would very much like to see more stability on the market and the ability to produce more and we are will follow where the group will follow,” he said.

The United States is eager to see Saudi Arabia and its OPEC partners pump more oil to help bring down the high cost of gasoline and dampen 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 an American demand,” said Abdulaziz Sager, president of the Riyadh-based Gulf Research Center.

“There are technical, political and economic complications associated with this decision.”

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

Biden recently said he would not directly ask Saudi leaders to increase oil production. Instead, he would continue to argue that all Gulf states should increase oil production, he said. Read more

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

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Reporting by Jarrett Renshaw, Maha El Dahan and Aziz El Yakoubi; additional reporting by John Irish in Paris and Ahmad Ghaddar in London; Editing by Kirsten Donovan and Philippa Fletcher

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