Saudi Arabia and Russia plan deep oil cuts in defiance of the United States

Saudi Arabia is seeking to raise oil prices at a crucial meeting in Vienna, in a move set to anger the United States and help Russia.

Riyadh, Moscow and other producers Getting ready to announce deep discounts At the OPEC+ cartel meeting on Wednesday, according to people familiar with the discussions.

The size of the cut has yet to be agreed, but Saudi Arabia and Russia are pushing for cuts of between one and two million barrels per day or more, although these could take place in phases over several months. Analysts said the cuts would likely trigger US countermeasures.

“This is not the old Saudi Arabia, and the US may have been a bit slow or unwilling to admit that on energy matters,” said Raad al-Qadri, an analyst at Eurasia Group.

“If they wanted a higher price of oil, they’d clearly indicated that they would continue to do so, even if it led to a tit-for-tat reaction from the United States.”

Wednesday meeting in OPEC Members as well as other producers gathered hastily at the cartel’s headquarters in Vienna, as ministers rushed to the Austrian capital for what analysts described as the most important gathering in years.

Alexander Novak, Russia’s chief energy official, is expected to attend and is understood to support a significant production cut, as Russian oil is already trading at a huge discount as European buyers have turned away.

A person familiar with the discussions said the cuts would come from current production and not from quota levels that some OPEC+ members have been unable to meet after years of mismanagement and underinvestment.

Such a cut would likely have a major impact on prices, which have fallen over the summer in a spur of Democrats’ electoral chances for President Joe Biden in next month’s US midterm elections.

Prices remain high by historical standards, and with the potential for a significant cut in production to become apparent, Brent crudeThe international benchmark rose to $91.50 a barrel on Wednesday – an 8 percent increase from last week.

Tensions between Saudi Arabia, the world’s largest crude oil exporter, and the United States, the world’s largest consumer, come as analysts warn of a worsening global crisis. energy war Because of the Russian invasion of Ukraine.

Riyadh and Moscow have stepped up their drive to cut production to stem a drop in oil prices, which have fallen from around $120 a barrel in early June, a drop that has hit Russian state revenues.

The United States wants to restrict Russian oil revenues to strip its military of funding, making Saudi Arabia’s cooperation with Moscow a source of tension between Riyadh and the White House.

Helima Croft, a former CIA analyst and head of commodity research at RBC Capital Markets, said Russia was likely to turn its attention to turbulent oil markets, having already cut off most gas supplies to Europe.

“We believe that more asymmetric acts of vandalism are coming as winter approaches,” she said.

The risk of more US-Saudi pressure comes more than two months after Biden traveled to Jeddah to meet Crown Prince Mohammed bin Salman and said the kingdom would “take additional steps” to increase oil supplies.

White House efforts to bring down US gasoline prices have included months of shuttle diplomacy with Gulf oil producers, calls for US shale oil producers to increase supplies and releases of oil from emergency stocks.

Just last week, Brett McGurk and Amos Hochstein, two of the Biden administration’s top officials, visited Saudi Arabia in the latest in a series of bilateral meetings.

In August, US Energy Secretary Jennifer Granholm asked refiners to build up domestic stocks rather than export more fuel. She warned that the US government was otherwise prepared to “consider additional federal requirements or other emergency measures.”

The Biden administration has been studying restrictions on exports of refined petroleum products — and has discussed the possibility with oil companies — according to people familiar with the discussions. People said that a significant reduction in supply from OPEC + would increase the likelihood of such a move.

Major US oil industry lobbyists on Tuesday urged Granholm to “disavow” any potential restrictions, warning that they would drive up prices in the United States and internationally.

While briefing reporters, White House Press Secretary Karen-Jean-Pierre said the administration would not comment in advance on any OPEC+ moves.

She added that the United States would focus “on taking every step to ensure that the markets are supplied with enough to meet the demand of the growing global economy.” Jean-Pierre said the United States is not considering new releases of the country’s Strategic Petroleum Reserve after tens of millions of barrels of storage were sold this year in an effort to lower energy prices.

But the United States and other G7 countries plan to try to impose Maximum price for Russian oil sales This year, a move that could lead to lower supplies from the country as well as tightening European sanctions on Moscow in December.

“OPEC+ producers are concerned that Russia’s planned price ceiling only now could subsequently set a precedent for broader use against other producers,” said Bob McNally, president of Rapidan Energy Group and a former adviser to the White House under George W. Bush.

Amin Nasser, CEO of the state oil company Saudi Aramco, Tuesday warned The market was largely focused on the demand impact of a potential recession rather than the current supply constraints.

Additional reporting by James Politi and Felicia Schwartz in Washington and Miles McCormick in New York

Leave a Comment