The US does not anticipate Saudi Arabia to quickly increase oil output and is waiting for the conclusion of the next OPEC+ meeting on Aug. 3, according to the US national security advisor, reducing expectations as US President Joe Biden visits the country.

“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 scheduled to arrive in Jeddah on Friday as part of a tour to rebuild the United States’ relationship with the monarchy, with energy supplies, human rights, and security cooperation on the agenda. 

Still, the US may be able to win a commitment from OPEC to increase output in the coming months in the aim of signaling to the market that supplies are on their way if required.

Saudi Arabia, together with the United Arab Emirates, controls the lion’s share of spare capacity in the OPEC+ group, an alliance comprising the Organization of Petroleum Exporting Countries (OPEC) and other producers, most notably Russia. During his trip, Biden is anticipated to speak directly with Saudi and UAE heads of state.

However, the monarchy has frequently stated that it would not act alone.

Brent oil prices are hovering slightly around $100 per barrel, down from a 14-year high of $139.13 in March, as investors consider additional COVID-19 lockdowns in major importer China and recession worries.

In a recent analyst note, Ben Cahill, a senior scholar at the Center for Strategic and International Studies, said, “Saudi Arabia prefers to manage the market through the Organization of the Petroleum Exporting Countries and allied producers (OPEC+), not through unilateral moves,”

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

Anwar Gargash, the UAE’s diplomatic adviser to President Sheikh Mohammed bin Zayed, also said on Friday that his nation desired a more stable oil market and would follow OPEC+ decisions. 

“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 United States is keen to see Saudi Arabia and its OPEC colleagues pump more oil to help down gasoline prices and relieve the greatest U.S. inflation in four decades.

“The decision to increase oil production is subject to several factors and considerations and does not depend on a U.S. request,” Abdulaziz Sager, Chairman of the Riyadh-based Gulf Research Center, stated.

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

OPEC’s spare capacity is running short, with most producers producing at full capacity. It is unknown how much more Saudi Arabia might contribute to the market and how fast.

Biden recently said that he would not explicitly push Saudi authorities to raise oil output. Instead, he said he will continue to argue that all Gulf governments should increase oil production. more info

OPEC+ agreed last month to raise output goals by 648,000 barrels per day (bpd) in August, reversing historic production restrictions imposed during the epidemic to fight plummeting demand.

Source: Reuters

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