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U.S. Officials Promised Saudis It Wouldn’t Let Oil Market Collapse

U.S. officials told Saudi Arabia prior to the OPEC+ meeting that it would help stave off a collapse in the oil market by buying oil at $75 per barrel to replenish the nation’s Strategic Petroleum Reserves, Wall Street Journal sources said on Tuesday.

In the runup to last week’s OPEC+ meeting, Wall Street Journal’s sources suggest that the rift between Saudi Arabia and the United States grew wider over oil markets.

The Wall Street Journal sources—who remain anonymous but are cited as OPEC+ delegates—paint an ugly picture of the state of relations between the two. A state of relations that might be so damaged as to be beyond repair. WSJ sources suggest that Saudi Arabia accused the United States of playing politics with oil, pinning the Biden Administration’s drive to keep oil production up on the effect it could have on mid-term elections.

That accusation is “categorically false” according to National Security Council spokeswoman Adrienne Watson, who in turn referred to the OPEC+ decision to cut production as “shortsighted.”

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The U.S. has unleashed a flurry of vocal barbs about the group’s decision since it was made—Watson’s is but one.

Sources inside the Saudi government said that Biden’s trip to Saudi Arabia didn’t help—in fact, it made the situation even worse. The Kingdom maintains, however, that its decision was entirely based on the needs of the oil market, and wasn’t made with the intent of hurting the United States.

But the anonymous OPEC+ delegates also said that the oil price cap proposed by the West was perceived by Saudi Arabia as an attack on crude oil producers. “It’s us against them,” Prince Abdulaziz told two Gulf oil ministers on phone calls, according to the sources.

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When OPEC+’s plans to cut production were leaked prior to the meeting, the United States set out to change what was about to happen. They sent out numerous officials to speak on behalf of the United States to keep OPEC+ from cutting production. But Saudi officials told the United States of the impending collapse that would take place if production wasn’t curbed. According to sources, the Saudis told US officials that oil could fall even to $50 per barrel unless it cut production.

The United States, for its part, vowed to replenish its SPR if Brent fell to $75 to keep prices from falling below the group’s comfort level.

WSJ sources said that the Saudis refused.

By Julianne Geiger for Oilprice.com

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