Crude Oil Up Nearly 5% as Biden Fails Convincing OPEC+ to Pump More
The price of the benchmark Brent crude jumped to over $100 a barrel Monday after United States President Joe Biden returned from Saudi Arabia without securing a deal to boost output. Saudi Foreign Minister Faisal bin Farhan Al Saud said Biden and Arab leaders did not even address the subject of OPEC+ increasing oil supply during the summit.
No Output Hike After Biden’s Meeting with Saudi Leaders
Joe Biden completed his first trip to the Middle East as the U.S. President, where he and other Arab leaders discussed America’s relationship with the Middle East at a summit in Jeddah. While the U.S. plans to maintain its ties with the Middle East, Biden failed to reach an agreement with the Saudis on hiking the oil supply.
As a result, prices of oil surged sharply Monday, with the Brent Crude and West Texas Intermediate (WTI) rising almost 5% each to $106.09 and $102.05, respectively. The upwards move comes after oil prices ended last week in the red for the fifth consecutive week amid concerns over a global recession.
However, Saudi Foreign Minister Faisal bin Farhan Al Saud Biden and Saudi officials did not even discuss the oil supply during the summit. Avatrade analyst Naeem Aslam reflected on the matter, saying that the message “is that it is Opec+ that makes the oil supply decision, and the cartel isn’t remotely interested in what Biden is trying to achieve.”
“Opec+ will continue to control oil supply, and one country alone cannot determine the oil supply – at least that is the message that traders have taken from Biden’s visit to Saudi Arabia.”he added.
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What Does this Mean for the Record-High US Inflation?
The latest jump in oil prices will continue weighing on consumers’ pockets as drivers still pay record-high gas prices. While crude prices have slightly normalized from their highs of roughly $130 after Russia’s invasion of Ukraine in March, the pressure on drivers remains as the world battles 40-year-high inflation and the Fed ponders another 75 bps rate hike.
President Biden said on Friday that Arab leaders share the “urgency” to hike oil supply, adding he expects Saudi Arabia to “further steps in the coming weeks” to achieve that. On the other hand, the Saudi officials said that any move toward boosting oil output would have to be made within the framework of OPEC+, the intergovernmental organization of 13 nations that oversees petroleum production, supplies, and prices in the global market.
OPEC+ is set to hold its next meeting on August 3, while the current cartel’s agreement is due to expire in September. This leaves room for a new agreement with potentially higher production, though much depends on the available excess capacity.
Earlier this year, Saudi Arabia held talks with China about pricing oil in Yuan. One of the reasons behind this move was the kingdom’s dissatisfaction with Biden’s efforts to secure a deal with Iran over its nuclear program.
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