Energy traders aren’t sleeping much these days as headline after headline keeps the industry on its toes. A report from the Financial Times overnight suggested that Saudi Arabia told the West it was prepared to raise oil production if Russia’s output fall substantially under the weight of sanctions.
It’s an interesting turn for the Kingdom, which has resisted calls to increase production despite oil trading at decade highs, though crude futures (CL1:COM) still fell nearly 3% to $112/bbl in response.
Snapshot: Earlier this week, EU leaders agreed to ban 90% of Russian crude by the end of the year as part of the bloc’s sixth sanctions package on Moscow. Another report from the Wall Street Journal on Tuesday outlined that OPEC+ could suspend Russia from a supply deal due to economic fallout from the invasion of Ukraine and its ability to pump more crude.
The oil group is set to meet today for its June meeting, and while it’s expected to maintain production, leader Saudi Arabia may announce an immediate supply boost or bring forward production increases (previously set for September) if the climate is right.
Before coming into office, President Biden vowed to make a “pariah” out of Saudi Arabia’s ruling family, blaming Saudi Crown Prince Mohammed Bin Salman for the 2018 murder of U.S.-based columnist Jamal Khashoggi. Relations between the two nations haven’t improved since, with the Kingdom rebuffing every U.S. call to pump more crude or dip into its spare capacity. Things have changed in recent weeks, however, as gas prices reached record highs and several high-level U.S. delegations were dispatched to Saudi Arabia to arrange a potential visit by Biden later this month.
“There’s a lot going on right now, but the idea we’re going to be able to, you know, click a switch, bring down the cost of gasoline, is not likely in the near term, nor is it with regard to food,” President Biden told reporters at the White House. “We can’t take immediate action that I’m aware of yet to figure out how we’re going to bring down the price of gasoline back to $3 a gallon, but we can compensate by providing for other necessary costs for families by bringing those down.” In an op-ed on Memorial Day, Biden wrote that the Fed has the “primary responsibility to control inflation” and called the current high-priced environment America’s “top economic challenge right now.”