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

Instead, the administration is promising that Biden’s focus will be “bigger” than just energy.

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

In his discussions with the Saudi government and when he met with officials from Saudi and five other Persian Gulf oil-producing states on Saturday, Biden again acknowledged that oil will inevitably come, especially given the turmoil in the global energy market. Russian invasion of Ukraine. “We certainly expect to spend some time with them [Gulf Cooperation Council] And will talk to the Saudis about energy security,” the official said.

Oil has been in supply for decades Inescapable Donald Trump lashed out at OPEC on Twitter and George W. Bush has been the subject of past US presidents’ dealings with the desert kingdom, including personally appealing to the Saudis to increase their production.

But Biden’s Washington Post defended his decision to visit the country last weekend, despite his previous vows to make Riyadh a “pariah” for its human rights abuses, highlighting power from his to-do list. Instead, it focused on human rights and their desire to “strengthen strategic partnerships” in the Middle East.

While Biden is focused on pressuring the kingdom to increase its oil production or loosen OPEC policy, Saudi Arabia is unwilling or unable to deliver. According to several analysts and diplomats. Instead, the best that comes out of the negotiations is relatively Modest contracts from Saudi Arabia To invest in it Oil production capacity or The giant Motiva Enterprises, which runs its state-owned oil company in Texas, will expand capacity at the refinery.

So what should the US expect on oil from the trip?

“Not much,” said David Goldwyn, head of the Atlantic Council’s Global Energy Center’s Energy Advisory Board and a former State Department energy adviser under Obama. Administration. “I don’t expect that Biden is going to walk away with promises of more oil production for diplomatic reasons. It’s too bad for the US to hear and too cruel for the Saudis.

Instead, see Goldwyn et al Biden’s visit fulfills a de facto deal made in June when the expanded oil-producing bloc OPEC+ agreed to Biden’s calls to rapidly increase oil output. This is more than originally planned.

Members of the oil-producing group announced at the time that they would raise their collective output to 648,000 barrels a day, up from 400,000 barrels a day in July and August. They have so far failed to meet their quotas, however, fueling speculation that Saudi Arabia and OPEC in general may not have as much idle oil production capacity as originally thought.

A steady decline in oil prices may make discussions of further production increases redundant anyway, analysts said. The US benchmark oil price, which has soared above $120 a barrel several times this year, fell to $96 a barrel on Tuesday as rising domestic production, market awareness of Russia Oil is moving in large quantities to China and India on fears that a recession will reduce demand in the coming months.

As oil prices ease, keeping enough spare supplies to use in future emergencies is a big concern among major producers.

“I think the US and Saudi Arabia (and the UAE) reached an understanding last month and this week’s trip won’t change much on the oil policy front,” Bob said. McNally, who headed analyst firm Rapidan Energy during the George W. Bush administration and is the National Security Council’s international energy adviser, said in an email. “Saudi Arabia and the UAE are likely to dry up their remaining spare production capacity and may indicate a willingness to increase output if necessary later this year.”

Oil market analysts are more concerned about Saudi Arabia and other OPEC countries They may not have as much oil in their reserves as previously believed. Biden asking Saudi Arabia to pump more oil could spur the oil market on worries that fewer barrels are available in the event of a future emergency, said Brenda Shafer, senior energy adviser at the Foundation for Defense of Democracy think tank. That’s especially true given that the administration is already draining strategic petroleum reserves at home, drawing millions of barrels of oil a day in an effort to keep prices down.

“If Saudi Arabia and the UAE increase production, the market may become more nervous, because you’ve lost your last reservoir,” Shafer said in an interview. “It’s reducing the supply cushion and that’s really dangerous.”

One idea that Biden might try to push is that Saudi Arabia and the rest of OPEC would drop Russia from its expansion. The “OPEC+” partnership, which includes an additional 10 producers and the original 13 OPEC members. Russia is the world’s third largest oil producer after the United States and Saudi Arabia Arabia, has been in that partnership since 2016.

But analysts said the cartel’s internal politics outweighed any requests Biden might make regarding Russia. OPEC nations, already struggling to meet their oil production quotas, may prefer to have Russian supplies to the group. Russia may try to leave OPEC+ for its own reasons, including breaking free from the cartel’s quota system.

“There is a lot of talk that Russia will leave the OPEC+ group anyway,” Joe Westphal, a former US ambassador to Saudi Arabia, said in an interview. “His influence will soon diminish. It is in our interest for the president to encourage his views on Russia and its place in the world in relation to petroleum.

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