The Biden administration asked Saudi Arabia – the oil producer group OPEC’s de-facto leader – to wait for a month before it cuts oil production.
This delay in the supply reduction could have averted oil price increases in the U.S. until after the midterm elections. The Saudi government however did not specifically mention this in its statement.
The Biden administration denied any suggestion that it made a request that is politically motivated. Adrienne Watson, spokesperson of the National Security Council stated that it was “categorically false to connect this to the U.S. elections.”
She added: “It’s always been about the impact on the global economy and impact on families at home and around the world, especially as Putin wages his war against Ukraine.”
Saudi Arabia declined Biden’s request, and in October, OPEC+ declared its biggest oil supply cut since 2020 starting November 2022 of 2 million BPD. This translates to worries about a worldwide recession and higher prices. U.S. lawmakers are currently calling for a reevaluation of U.S. relations with Saudi Arabia.
In a statement, the Saudi government defended its decision, saying that all the decisions of OPEC are based on economic needs and forecasts. The statement read, “The Government of the Kingdom clarified through its continuous consultation with the US Administration that all economic analyses indicate that postponing the OPEC+ decision for a month, according to what has been suggested, would have had negative economic consequences.”
contact dw energy
Want to learn more about oil & gas investing? Our expert team can provide you with more information or schedule a consultation to talk about diversifying your investment portfolio.
The government statement further said, “The Government of the Kingdom of Saudi Arabia would first like to express its total rejection of these statements that are not based on facts, and which are based on portraying the OPEC+ decision out of its purely economic context. This decision was taken unanimously by all member states of the OPEC+ group.”
John Kirby, the National Security Council spokesman responded to the Saudi claims, accusing them of helping Russia’s revenues and slowing down the impact of Western sanctions on Moscow. “In recent weeks, the Saudis conveyed to us – privately and publicly – their intention to reduce oil production, which they knew would increase Russian revenues and blunt the effectiveness of sanctions. That is the wrong direction,” Kirby said. “We presented Saudi Arabia with analysis to show that there was no market basis to cut oil production targets, and that they could easily wait for the next OPEC meeting to see how things developed.”
The rise in gasoline and oil prices has been a key driver of inflation in the United States as well as globally. These recent developments highlight the growing tensions in the almost 80-year United States-Saudi security-based relationship, as both of them imply that the other is not upholding the end of their bargain, in a partnership largely based on the energy for security principle.
However, the government of Saudi Arabia still stressed the continued importance of having a good relationship with the United States. In a statement, it said, “The Kingdom affirms that it [views] its relationship with the United States of America as a strategic one that serves the common interests of both countries.”
“The Kingdom also stresses the importance of building on the solid pillars upon which the Saudi-US relationship had stood over the past eight decades. These pillars include mutual respect, enhancing common interests, actively contributing to preserving regional and international peace and security, countering terrorism and extremism, and achieving prosperity for the peoples of the region.”
Get more exclusive insights on the world of oil – oil investing, tax breaks, diversified investment examples, and up-to-date coverage of the latest happenings in the oil market – by visiting DW Energy Group’s Insights page.
Contact dw energy
Sources:
“OPEC+ To Cut Oil Production By 2 Million Barrels Per Day,” Oil Price, https://oilprice.com/Energy/Crude-Oil/OPEC-To-Cut-Oil-Production-By-2-Million-Barrels-Per-Day.html
“A statement from the Ministry of Foreign Affairs regarding the statements issued about the Kingdom following the OPEC+ decision,” The Embassy of the Kingdom of Saudi Arabia, https://www.saudiembassy.net/statements/statement-ministry-foreign-affairs-regarding-statements-issued-about-kingdom-following
“US dismisses Saudi defence of Opec+ oil output cuts as ‘spin’, Financial Times, https://www.ft.com/content/c269b29c-6c92-48c5-89eb-029271faaf35
“Saudi rejects criticism over OPEC+’s decision to cut output,” Middle East Economy, https://economymiddleeast.com/news/saudi-rejects-criticism-over-opecs-decision-to-cut-output/