Saudi Arabia is looking to raise oil prices at a key meeting in Vienna, in a move intended to anger the United States and aid Russia.
Riyadh, Moscow and other manufacturers are ready to announce deep cuts at the Opec + cartel meeting on Wednesday, according to people with knowledge of the discussions.
The size of the cuts remains to be agreed, but Saudi Arabia and Russia are pushing for cuts of 1 million-2 million bpd or more, although this could be tapered over several months. The cuts are likely to trigger US countermeasures, analysts said.
“This is not the old Saudi Arabia and the US may be a bit slow or unwilling to admit it on energy matters,” said Raad Alkadiri, an analyst at Eurasia Group.
“If they want higher oil prices, they have made it clear that they will pursue that, even if it leads to a tit-for-tat response from the US.”
Wednesday’s meeting of Opec members plus other manufacturers were hastily convened at the group’s headquarters in Vienna, with ministers flocking to the Austrian capital for what analysts say is a meeting. most important in many years.
Russia’s top energy official, Alexander Novak, is expected to attend and is understood to support substantial production cuts, with Russian oil already trading at a large discount as people buy Europe turned away.
A person familiar with the discussions said the cuts would be made from existing output, not quotas that some Opec+ member countries have been unable to make after years of mismanagement. and low investment.
Such cuts would likely have a major impact on prices, which have fallen over the summer to fill President Joe Biden’s Democratic presidential run-off in the US midterm elections next month.
Prices remain high by historical standards and the possibility of large production cuts becomes clear, Brent Crude Oilinternational standards, rose to $91.50 a barrel on Wednesday – an 8% increase from the previous week.
Tensions between Saudi Arabia, the world’s biggest crude exporter, and the US, the world’s biggest consumer, come as analysts warn of a deepening global surge energy war Russia’s invasion of Ukraine.
Riyadh and Moscow have stepped up their pursuit of production cuts to stem the slide in oil prices, which have fallen from around $120 a barrel in early June, a drop that has hit Russia’s state revenues.
The United States wants to limit Russia’s oil revenues to starve its military funding, making Saudi Arabia’s cooperation with Moscow a source of tension between Riyadh and the White House.
Helima Croft, a former CIA analyst and head of commodities research at RBC Capital Markets, said Russia is likely to turn its attention to disrupting the oil market, having cut off most of its supply. gas supply to Europe.
“We think more asymmetrical, disruptive behavior is coming as we head into winter,” she said.
The risk of increased tensions between the US and Saudi Arabia comes more than two months after Biden traveled to Jeddah to meet Crown Prince Mohammed bin Salman and said the kingdom would “take additional steps” to increase oil supplies.
White House efforts to lower U.S. gasoline prices include months of shuttle diplomacy with Gulf oil producers, calls for U.S. shale producers to increase supplies and free up oil from storage. emergency reserves.
Just last week, Brett McGurk and Amos Hochstein, two senior Biden administration officials, visited Saudi Arabia for a series of bilateral meetings.
In August, US Energy Secretary Jennifer Granholm told refiners to build stockpiles at home rather than export more fuel. She warned that the US government was prepared to “consider additional federal requirements or other emergency measures”.
The Biden administration has considered restrictions on exports of refined petroleum products – and has discussed the possibility with oil companies – according to people familiar with the discussions. A significant Opec+ supply cut would increase the likelihood of such a move, these people said.
Major US oil industry lobbying groups on Tuesday urged Granholm to “reject” any potential restrictions, warning that they would continue to push prices up in the United States and internationally. .
During a press conference with reporters, White House Press Secretary Karine Jean-Pierre said the administration would not comment on any Opec+ moves.
She added that the US would focus “on taking steps to ensure markets are sufficiently supplied to meet the needs of a growing global economy”. Jean-Pierre said the US was not considering new issuance from its Strategic Petroleum Reserve after selling off tens of millions of barrels from its stockpile this year in an attempt to lower energy prices.
But the US and other G7 countries plan to try to impose Russia’s oil price limit this year, a move that could lead to a drop in supplies from the country along with a tightening of European sanctions on Moscow in December.
“Opec+ producers are worried that the price cap that was planned for Russia only could now become a reality,” said Bob McNally, head of Rapidan Energy Group and former White House adviser George W. Bush. precedent for wider use against other manufacturers.
Amin Nasser, chief executive officer of state oil company Saudi Aramco, warning on Tuesday that the market has been too focused on the demand impact of a possible recession rather than the constraints of current supply.
Additional reporting by James Politi and Felicia Schwartz in Washington and Myles McCormick in New York