The United Arab Emirates and Saudi Arabia have declined calls with President Biden as the latter seeks to drum up further support for sanctions against Russia, the Wall Street Journal has reported, citing unnamed officials from the U.S. and the Middle East.
According to the sources, both Crown Prince Mohammed bin Salman of Saudi Arabia and Sheikh Mohammed bin Zayed declined requests for direct communication with President Biden in recent weeks, the report said.
“There was some expectation of a phone call, but it didn’t happen,” a Washington official told the Wall Street Journal about Crown Prince Mohammed. “It was part of turning on the spigot [of Saudi oil].”
The U.S. has been looking to Saudi Arabia and its closest regional ally, the UAE, to boost oil production in order to bring down oil prices, but neither has been particularly forthcoming. By extension, OPEC has also demonstrated its reluctance to boost production by more than originally agreed.
The Wall Street Journal report notes that Riyadh considers U.S.-Saudi relations to have worsened since President Biden came into office, with Saudi Arabia wanting bigger commitments to bilateral friendship from Washington.
The Biden administration has condemned the murder of dissident journalist Jamal Khashoggi and has actively distanced itself from the Yemen conflict, in which Saudi Arabia and the UAE are fighting Iran-backed Yemeni rebels.
In a recent interview for The Atlantic, the Saudi Crown Prince signaled that he expected Washington to do more to strengthen bilateral relations and suggested that the White House’s behavior towards Riyadh could harm Biden himself.
“Where is the potential in the world today?” the Crown Prince also told The Atlantic. “It’s in Saudi Arabia. And if you want to miss it, I believe other people in the East are going to be super happy.”
Washington has sought to mend fences with Saudi Arabia and the UAE, but it seems this would take longer than expected.
By Irina Slav for Oilprice.com
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Due to global underinvestment in oil and gas resulting from the pandemic and incessant pressure by environmental activists on the global industry to divest of its oil and gas assets and also hasty policies by the EU to accelerate energy transition at the expense of fossil fuels abetted by the hapless International Energy Agency (IEA), the global spare production capacity including OPEC+’s has been shrinking.
OPEC+ still sees the global oil market as balanced despite the mad rises of crude oil prices as a result of the Ukraine conflict. So it will keep whatever small spare capacity it has to use when the market does become truly imbalanced.
Furthermore, OPEC+, jointly led by Saudi Arabia and Russia, isn’t going to respond every time President Biden makes a short-sighted decision like the one taken yesterday to stop buying an estimated 600,000 barrels a day (b/d) of Russian oil and expect OPEC+ to raise production to replace them. Biden’s decision led immediately to further rise in oil prices which will hurt the global economy particularly the economy of the United States without causing any harm to Russia since it will sell this volume in China instead at high prices.
The United States is the world’s second largest crude importer after China currently importing an estimated 9.0 million barrels a day (mbd). It is the most vulnerable among major economies to oil price shocks.
Saudi Arabia should have severed diplomatic relations with the United States after former President Trump openly insulted the Saudi royal family saying they wouldn’t stay in power for two weeks without US support. It should decline Biden's proposed visit.
Moreover, if the purpose of President Biden’s visit to Saudi Arabia is to persuade it to lift its crude oil production, then he will be wasting his time. The reason is that Saudi Arabia doesn’t have the capacity to raise its production beyond the current level of around 10.0 mbd of which 2.0 mbd come from stored oil. Saudi Arabia isn’t prepared to reduce the size of its stored oil because that is the one instrument in its hand to exercise some influence in the global oil market over prices.
US shale oil production is a spent force incapable of adding more than 200,000-300,000 b/d to its claimed average production of 11.0 mbd in 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
But as they play their games and expend their pawns, what all these forget is that there is One who holds all the cards and will one day call in His chips.