news agency

OPEC + heading for geopolitical confrontation due to Biden’s demand

OPEC + heads into a politically high-profile showdown with US President Joe Biden, as Saudi Arabia and its allies must choose whether or not to heed US demands to increase oil production.

If the organization rejects the request, it is headed for a serious conflict with the White House, which is concerned that inflation caused by high energy prices could derail its economic agenda.

Giving in to pressure and increasing production would keep Saudi Arabia’s closest ally, at the expense of the hard-won oil price rally, which has boosted the kingdom’s coffers.

“Take a look at oil prices,” Biden told reporters at a press conference at the United Nations climate summit in Glasgow on Tuesday. Fuel costs are high due to “the refusal of Russia or the OPEC nations to pump more oil.”

It’s a fight that transcends the oil market and delves into America’s troubled relationship with long-standing allies in the Middle East. So far, Biden has refused to speak to Saudi Crown Prince Mohammed bin Salman, enraging the royal palace in Riyadh, which had almost unlimited access to the White House during the Trump Administration.

Despite pressure from Biden, which has been supported by Japan and India, several key members of the Organization of the Petroleum Exporting Countries and its allies show little sign of budging. Iraq and Kuwait, for example, have said publicly that they should stick to the current plan to reactivate just 400,000 barrels per day of idle production each month and leave the market in deficit for the rest of the year.

That outcome is widely expected by OPEC watchers, yet diplomatic pressure continued Wednesday, according to people familiar with the talks, opening the door to a possible last-minute deal.

Either way, the oil market could face weeks of volatility, as conflict unfolds between the world’s largest producers and consumers in the wake of Thursday’s OPEC + meeting. That was evident on Wednesday, when crude oil futures fell 3.6% to $ 80.93 a barrel at 12:22 pm in New York.

Production problems

If OPEC + complies with US demands, it is unclear how much additional oil beyond the planned increase of 400,000 barrels per day would be enough for Biden. But if the group promised an increase of 600,000 or even 800,000 barrels per day by December, there would be doubts as to whether the group is capable of achieving it.

The group is already facing difficulties meeting its monthly production targets, as a lack of investment in oil fields in countries such as Angola, Nigeria and even Kuwait hampers production. Saudi Arabia, Russia and the United Arab Emirates may have the ability to exceed their quotas to compensate for that of weaker countries, but doing so would require changes to the existing OPEC + agreement.

One reason for OPEC + resistance is the risk that if the additional oil were supplied, it could quickly tip markets in the other direction. Supply is tight now, but a surplus is expected to return early next year.

.

You may also like

Hot News

TRENDING NEWS

Subscribe

follow us