Don’t expect Biden’s Saudi trip to lower oil prices

President Joe Biden insists his trip to Saudi Arabia on Friday covers everything from strengthening security in the region to reorienting policy with the kingdom. Anything but the one thing he really needs but can’t get: more oil.

A strong push from the president is unlikely to get Saudi leaders to inject new crude supplies into the global oil market, where soaring prices this year have pushed gasoline prices above $5. the gallon. It’s not clear that Saudi Arabia could even ramp up production fast enough to have much of an impact, despite holding some of the largest oil reserves in the world.

And even if Biden’s push somehow works, that action could disrupt markets, which had begun to ease in recent days, and prolong Americans’ economic pain, energy experts say.

Instead, the administration promises that Biden’s goal would be “bigger” than just energy.

“We hope to advance our interests on a wide range of issues from terrorism to climate change to Iran,” a senior administration official said by email. “That’s why the president is leaving.”

Then again, the official acknowledged, oil will inevitably come back, both in Biden’s discussions with the Saudi government and when he met on Saturday with officials from Saudi Arabia and five other oil-producing states in the Persian Gulf, in particular account. given the turmoil in global energy markets since the Russian invasion of Ukraine. “We would certainly expect us to spend time with the [Gulf Cooperation Council] and with Saudis talking about energy security,” the official said.

For decades, oil supply has been the hot topic of former US presidents’ dealings with the desert kingdom, including Donald Trump attacks OPEC on Twitter and George W. Bush pleads in person the Saudis to increase their production.

But Biden’s Washington Post Editorial last weekend, justifying his decision to visit the country, despite his earlier wishes to make Riyadh a “pariah” for its human rights violations, visibly left energy out of his list of things to do. Instead, he focused on human rights and his desire to “strengthen a strategic partnership” in the Middle East.

If Biden focused on pressuring the kingdom to increase oil production or ease OPEC policy, Saudi Arabia would likely be unwilling or unable to deliver on its promises, according to multiple analysts and diplomats. Instead, the best that could come out of the talks would be relatively modest agreements from Saudi Arabia invest in his oil production capacity or increase capacity at the giant Motiva Enterprises refinery that its state-owned oil company runs in Texas.

So what should the United States expect regarding the oil from this trip?

“Not much,” said David Goldwyn, head of the energy advisory board for the Atlantic Council’s Global Energy Center and former energy adviser to the Obama administration’s State Department.. “I don’t expect, for diplomatic reasons, Biden to come out of there with the promise of more oil production. That would be too crass for the United States to ask and too blatant for the Saudis. »

Instead, Goldwyn and others see Biden’s visit as the fulfillment of a de facto deal done. when the broader oil bloc OPEC+ acquiesced to Biden’s calls in June to increase oil production sooner than he had originally planned.

Members of the oil group announced at the time that they would increase their collective production by 648,000 barrels per day in July and August instead of the 400,000 barrels per day they had originally planned to add. They have so far have not reached their quotashowever, fueling speculation that Saudi Arabia and OPEC in general may not have as much spare oil production capacity as originally thought.

Steadily falling oil prices could make such talk of further production increases redundant anyway, analysts said. The benchmark US oil price, which had topped $120 a barrel several times this year, fell to $96 a barrel on Tuesday on rising domestic production, market awareness that Russian oil is was moving in large volumes to China and India, and on fears that a recession could undermine demand in the coming months.

As oil prices fall, the biggest concern for major producers is maintaining enough reserve supply to use in the event of a future emergency.

“I think the US and Saudi Arabia (and the UAE) reached an agreement last month, and this week’s trip won’t change much on the oil policy front,” said Bob McNally, director of analyst firm Rapidan Energy and international member of the National Security Council. energy adviser under the George W. Bush administration, said in an email. “Saudi Arabia and the United Arab Emirates are expected to keep their remaining unused production capacity dry and perhaps signal a willingness to further increase production if needed later this year.”

Oil market analysts are increasingly concerned that Saudi Arabia and other OPEC countries may also not have as much oil in their reserves as previously believed. Given that, Biden asking Saudi Arabia to pump more oil could scare the oil market into fears that fewer barrels will be available in a future emergency, said Brenda Shaffer, senior energy adviser at the group. reflection of the Foundation for the Defense of Democracies. This is especially true given that the administration has already drained the country’s strategic oil reserves, drawing off a million barrels of oil a day in an effort to drive down prices.

“The market might get more nervous if Saudi Arabia and the UAE increase production because you’ve lost your last tank,” Shaffer said in an interview. “It reduces the supply cushion, and that’s really dangerous.”

One idea Biden could try to push is for Saudi Arabia and the rest of OPEC to pull Russia out of its expanded “OPEC+” partnership, which includes 10 additional producers as well as the original 13 OPEC members. Russia, the world’s third largest oil producer after the United States and Saudi Arabia, has been in this partnership since 2016.

But internal cartel politics would likely trump any demands Biden might make regarding Russia, analysts said. OPEC countries that are already struggling to meet their oil production quotas might prefer Russian supply to be available to the group. Russia could also seek to leave OPEC+ for its own reasons, including freeing itself from the cartel’s quota system.

“There’s a lot of talk that Russia will leave the OPEC+ group anyway,” former US ambassador to Saudi Arabia Joe Westphal said in an interview. “Their influence will soon diminish. It would be in our interest for the president to encourage his views on Russia and its place in the world as it relates to oil.

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