Biden is on the hunt for higher oil production on his trip to Saudi Arabia

Biden is on the hunt for higher oil production on his trip to Saudi Arabia

The president had harsh words for Saudi Arabia on the campaign trail, and the leaders with whom he hopes to negotiate haven't forgotten.JEDDAH, Saudi Arabia  President Joe Biden will urge Saudi Arabia to boost oil production

when he visits Jeddah this weekend, but experts do not expect a significant increase given his administration’s frosty ties with the desert kingdom and doubts over spare output capacity.

Raising oil output could help bring down gas prices and ease raging inflation in the U.S. which at 9.1% in June was the highest in 41 years ahead of crucial midterm elections in November.

enlightenedKeep Pushing Your Profitable Trading With AssetsFXenlightened


But Biden’s tough line on Saudi Arabia’s human rights record and uncertainty over how much more oil Saudi Arabia can produce have meant prices have remained stubbornly high, a sign markets are not pricing in expectations of extra supply any time soon.

In 2019, while he was campaigning for the presidency, Biden described Saudi Arabia as a “pariah” state over the killing of the journalist Jamal Khashoggi, which the CIA blamed on the country’s de facto ruler, Crown Prince Mohammed bin Salman.
 

“I think the crown prince is not going to go out of his way for Biden. The comments that were made during the presidential campaign, these are lasting comments. I don’t know how you reset after those comments,” said Stephen Innes, the managing partner at SPI Asset Management.

The International Energy Agency’s July oil market report says the best bet for spare oil capacity lies with the United Arab Emirates and Saudi Arabia, which between the could boost supply by 2.6 million barrels a day, according to the agency’s data.
 

That compares with June’s total output of 43.6 million barrels a day pumped by the OPEC oil-producing cartel and allied producing countries, which includes Russia’s contribution of 9.74 million barrels a day.The U.S. and its allies want to reduce reliance on Russian oil because of Moscow’s war in Ukraine and make up the difference elsewhere.

But last month, French President Emmanuel Macron was caught on camera telling Biden that the UAE’s ruler had confided in him that his country was already pumping as much as it could and that Saudi Arabia could offer only a little more capacity.

“I don’t know who’s playing the bluffing game here, whether they’re playing against the Biden hand because they’re still annoyed at what he said during the elections over the Khashoggi incident,” Innes said.
 

However, there are doubts over the accuracy of the International Energy Agency data, another oil industry expert said. “There’s always a certain ambiguity, especially with regards to something like spare capacity, even with regards to production,” said Craig Erlam, a market analyst with OANDA, which provides currency and trading data.

Saudi Arabia may also be loath to boost production just as the International Monetary Fund and the World Bank warn of a global economic slowdown and a potential recession, which would depress oil demand anyway, experts said.
 

Extra Saudi output would push prices down further, threatening the stability of OPEC and its allied membership, known as OPEC+, who work together to set output targets and stabilize prices.

“Saudi Arabia is extremely committed to OPEC and even the OPEC+ alliance so that’s where their loyalty, I think, is ultimately going to lie,” Erlam said. Russia leads the group of non-OPEC members allied with the cartel, and protecting the alliance would mean not upsetting Russia, one of the world’s top oil producers.
 

“A factor the Saudis may be concerned about is turning their back on Russia, because Russia has been a strong ally through thick and thin supporting OPEC managing oil prices,” Innes said.


enlightenedTop THREE Award-Winning Brokers in 2022 enlightened

LiteFinance IC Markets | Exness
 


That leaves Biden with little room to maneuver and likely little to show on the price of oil after his visit to Jeddah. “What we’re probably going to see after this weekend is an agreement that may be slightly more than a token gesture from Saudi Arabia,” Erlam said.

“But not so much so that it causes any friction within the alliance that is a primary concern for them or has an overly big impact on the market,” he added. - nbcnews

Hot Topics


Hyosung America Makes Bitcoin Purchasing App Available To 175,000 ATMs


Bitcoin To Make New All-Time-Highs Within 24 Months: Coinshares CSO


NFTs And Games Remain Intact Amid Coldest Winter

 

Featured Brokers