New York, USA (CNN)– When he was running for president in 2019, Joe Biden promised to make Saudi Arabia a “pariah”, because of the kingdom’s human rights record. Faced with economic reality and after becoming president, Biden backed off.
With gasoline prices near record levels and inflation fears rising, Biden visited Saudi Arabia last month. He shook hands with Saudi Crown Prince Mohammed bin Salman, who US intelligence estimated had “approved the arrest or murder” of journalist Jamal Khashoggi in 2018.
The president left Saudi Arabia without the kingdom’s public consent to help with oil prices, but White House officials have expressed optimism that help is already on the way.
Now, it’s clear that Biden’s political gamble of being nice to MBS hasn’t been quite as fruitful as Americans are feeling at gas stations, at least not yet.
On Wednesday, “OPEC Plus” announced an agreement to increase oil production, but only by a symbolic amount of 100,000 barrels per day. It is not enough to move the market index in a world that consumes 100 million barrels of oil per day. To clarify the context, “OPEC Plus” had increased production by 648,000 barrels per day at the end of last June.
Bob McNally, president of the energy consulting firm Rapidan Energy Group, told CNN that the latest increase announced by “OPEC Plus”, on Wednesday, is “negligible, and almost imperceptible.” He added that it is the lowest rate of increase in production in the history of OPEC.
McNally continued by saying that “OPEC Plus increased production to a minimum. The market interprets this as a step lighter than rejection,” considering it a “purely symbolic gesture.”
Others went further, calling the OPEC+ move an “insult” given Biden’s trip to Saudi Arabia, the de facto leader of the group of oil-producing countries.
It’s a “slap in the face to the Biden administration,” Matt Smith, chief oil analyst at Kpler, told CNN. This trip, the meeting with MBS, didn’t work out.
Robert Jaeger, vice president of energy futures at Mizuho, also described the OPEC+ decision as a “slap in the face”. “I have to say I’m amazed that they dumped only 100,000 barrels per day,” Yauger said.
The White House considers it a “step in the right direction.”
The White House acknowledged that the “OPEC Plus” decision will not significantly affect the price of gasoline for Americans.
Asked by CNN if the move would have a significant impact, Amos Hochstein, the White House’s senior energy adviser, replied: “No, it isn’t.”
Hochstein told CNN on July 19 after Biden’s visit to Saudi Arabia that he was “absolutely confident” that OPEC+ would move to increase production “as a result of the president’s talks.”
Hochstein described the increase announced by “OPEC Plus”, on Wednesday, as “a step in the right direction”, but he declined to respond to whether Biden was disappointed or not with the increase.
Of course, there may be legitimate reasons behind the decision of “OPEC Plus” not to respond to Biden’s call to increase production.
Recession fears have spread in recent weeks, adding to the oil market’s concern about weak energy demand. Last Monday, US oil prices closed at their weakest point in 5 months, relieving pressure on “OPEC Plus” to significantly increase production.
After exceeding $5 a gallon in June for the first time, gasoline prices have also fallen dramatically. The average price of gasoline fell to $4.16 a gallon on Wednesday, marking 50 consecutive days of lower prices, according to the American Automobile Association.
There is also growing skepticism in the oil market about how much power the OPEC+ group really has to increase production, even if it wanted to.
The group has consistently lowered its production targets, raising questions about how much spare capacity is left outside Saudi Arabia and the United Arab Emirates.
“OPEC Plus” alluded to this issue in its statement, on Wednesday, saying that “the very limited availability of spare capacity necessitates its use with extreme caution.”
Regardless of the reason behind the small increase in OPEC Plus production, it is hard to imagine that Biden got what he wanted when he reluctantly agreed to sit down with MBS.
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