S. Arabia can’t violate OPEC quota, ministers tells Biden

Sopuruchi Onwuka, with agency reports

The Kingdom of Saudi Arabia is committed to output decisions of the members of the Organization of Petroleum Exporting Countries (OPEC) and its coalition producers, officials affirmed to the visiting President of the United States of America, Mr Joe Biden.

The decision by the kingdom which competes with the United States for world’s largest oil and gas output capacity stubs the persistent pressure by the Western economies for increased oil supply to ease strong prices in the market.

The Oracle Today reports that whereas the North American and Western European countries have slammed trade and diplomatic sanctions on Russia for invading Ukraine, the OPEC coalition is led by Saudi Arabia and Russia which jointly holds world’s biggest production capacity and the capacity to swing prices by controlling output.

Part of the President Biden’s agenda in his historic Middle East trip is to secure commitment from the oil kingdom to ease supply sentiments in the market by releasing greater volumes of supply.

U.S. officials had said Biden would discuss energy security with leaders of Gulf oil producers and hoped to see more action by OPEC+ to boost output. And oil supply surge has been part of President Biden’s working engagements with the Saudi Royal family, kingdom officials and broader regional leaders.

Saudi crown prince had told President Biden in a discussion on Saturday that unrealistic energy policies are responsible for the prevailing inflationary trends in the world, adding that the situation could worsen if incentives are not restored for petroleum industry investments.

Prince Mohammed bin Salman (MBS) told U.S.-Arab summit in Jeddah attended by President Joe Biden that more investment was needed in fossil fuel and clean energy technologies to meet global demand, and that unrealistic emission policies would lead to unprecedented levels of inflation.

The summit gathered Biden with leaders from six Gulf Arab states and Egypt, Jordan and Iraq.

He restated Saudi Arabia’s plans to raise nameplate oil production capacity from current 12 million barrels per day to a peak of 13 million barrels per day by 2027.

The position of the crown price means that the immediate relief expected by President Biden and other western leaders would not happen until 2027; a position corroborated by Saudi ministers who insisted that oil policy decisions for output rise would follow the OPEC+ market logic. The OPEC+ ministers are scheduled to meet on output decisions by August 3.

“We listen to our partners and friends from all over the world especially consumer countries,” Foreign Minister Prince Faisal bin Farhan told reporters. “But at the end of the day, OPEC+ follows the market situation and will supply energy as needed.”

 The alliance already moved to accelerate production increases in June, after calls from consumer nations including the US. Still, with oil prices tumbling from recent highs as recession risks grip markets, the picture could change before the policy meeting on Aug. 3.

Increases are expected to be modest as the Persian Gulf heavyweights choose to preserve their remaining spare capacity amid supply disruptions ranging from Libyan unrest to sanctions against Russia.

The International Energy Agency (IEA) which keeps market intelligence for western economies estimates that the OPEC’s spare capacity has already thinned down to just over 2 million barrels a day.

Under the terms of the existing OPEC+ agreement, Saudi Arabia’s production is due to reach 11 million barrels a day next month, a level it has only rarely maintained in its decades as a crude exporter. Any further increases would test the kingdom’s maximum sustainable capacity, which state-run giant Saudi Aramco puts at 12 million barrels a day.

The Oracle Today reports that President Biden traveled to Saudi Arabia on weekend to meet with officials from the desert kingdom and leaders from five other oil-producing Persian Gulf nations to boost oil supplies and reduce high fuel prices affecting economies of the world.

The sudden move by President Biden and other European leaders present a significant shift from pro-climate stance which aimed to restrict fossil fuel development as part of his effort to combat greenhouse gas emission.

Price MBS told President Biden that the world should pursue dual policies that simultaneously encourage investments in all complementary forms of energy as the world navigates through the energy transition phase.

He said COVID-19 and the geopolitics has made it necessary for joint efforts to support the global economy and that the transition to sustainable energy sources required a “realistic and responsible” approach.

“Adopting unrealistic policies to reduce emissions by excluding main sources of energy will lead in coming years to unprecedented inflation and an increase in energy prices, and rising unemployment and a worsening of serious social and security problems,” he said.