Truce Between US And Saudi Arabia
- US officials’ talks have been a game-changer for oil policy.
- The emergence of the new Covid variant last week helped knock off the price of oil.
- OPEC warned they could respond in kind to bolster prices.
United States: After weeks of enmity over high oil prices, the US and Saudi Arabia have reached an agreement, with the OPEC+ cartel promising a production increase even as the new Covid version threatens demand. Even as the virus lowers oil-producing nations’ prices, the group led by Saudi Arabia and Russia startled markets by agreeing to add 400,000 barrels of oil per day starting in January. It did, however, leave the door open to reconsidering its position, stating that ministers might reconvene at any time to reassess the decision if circumstances changed.
A truce has been reached after weeks of diplomatic tension between Saudi Arabia and the United States, with President Joe Biden demanding more oil to lower pump prices and OPEC pushing back. According to a source familiar with the negotiations, US officials have been in the Gulf this week, and the outcome of their discussions has been a game-changer that goes beyond oil policy. Neither side revealed what concessions they had gotten from the other.
Hochstein said the two governments had talked about how they could “partner to invest in the energy transition and collaborate to construct 21st-century clean energy architecture” earlier this week. It’s unclear how far the diplomatic mission has progressed: Biden has declined to deal directly with de facto ruler Crown Prince Mohammed bin Salman since assuming office. Iran, and talks about curbing its nuclear ambitions, are among the two countries’ common interests, aside from energy policy.
After his calls to OPEC to act went unheeded, Biden released millions of barrels from the US Strategic Petroleum Reserve last month to force down oil prices. With central banks throughout the world concerned about inflation, Biden wanted to broaden the impact of the action by enlisting the support of other countries such as Japan, India, and the United Kingdom.