As expectations for the Federal Reserve's interest rate hikes cooled, Saudi Arabia received news that it was not expected to increase production immediately, and international oil prices rose slightly.
As of press time, the international benchmark Brent crude oil has risen nearly 2% and is now trading at US$100.9/barrel, while WTI crude oil has risen by 1.6% and is reported at US$97.3/barrel.
Comprehensive media reports said that on July 13, Biden embarked on his first Middle East trip during his term of office, visiting Israel, the West Bank and Saudi Arabia. The trip to the Middle East is aimed at convincing Saudi Arabia and other Gulf oil-producing countries to significantly increase production.
Since last year, the domestic oil prices in the United States have soared, becoming the main driver of its inflation . In an effort to curb oil prices, Biden has repeatedly released oil reserves but with little success. After the conflict between Russia and Ukraine broke out, the European and American embargoes on Russian energy caused a huge supply gap. The Middle East, which is “floating on oil,” has thus become an important “variable.”
Although Biden will not make any public statement on increasing oil production, an official revealed to the media that Saudi Arabia is not expected to increase oil production immediately and will focus on the results of the next OPEC+ meeting.
According to analysis, it will be difficult for Biden to persuade oil-producing countries to significantly increase production.
Saudi Arabia has repeatedly reiterated that it will not take unilateral actions. "Saudi Arabia prefers to manage markets through OPEC+ rather than through unilateral action," Ben Cahill, a senior fellow at the Center for Strategic and International Studies, wrote in a recent report.
Foreign Affairs Advisor to UAE President Sheikh Mohammed bin Zayed Anwar Gargash also said on Friday that the UAE wants more stability in the oil market and will abide by OPEC+ decisions.
At the same time, the Gulf countries have also been trying to avoid "choosing sides" between the United States and Russia in handling the conflict between Russia and Ukraine. Some media said there is no sign that Saudi Arabia is prepared to sacrifice long-term relations with Russia in exchange for short-term diplomatic benefits in responding to Biden's oil demands.
Gulf Research Center Chairman Abdulaziz Sager said:
"The decision to increase oil production depends on several factors and considerations and does not depend on US requirements."
"The decision has technical, political and economic complexities."
The United States has put pressure on OPEC+ many times before, but the latter only agreed to a small increase in production. Last month, OPEC+ decided to raise its production target by 648,000 barrels per day in August, ending a record decline in production at the height of the epidemic.
With most oil-producing countries producing at maximum capacity, spare capacity within OPEC is shrinking, and it is unclear how large and fast Saudi Arabia can add supply to the market.
In addition, the cooling of expectations for an interest rate hike of 100 basis points in July also provided support to oil prices.
On Thursday, Federal Reserve hawk Bullard cooled down on radical interest rate hike expectations , saying he supported a 75 basis point interest rate hike in July. Fed Governor Waller expressed the same view, saying that 75 basis points is already a large rate increase, and the market expects the Fed to raise interest rates by a single 100 basis points in July, which is "somewhat aggressive."
At the same time, analysts expect that oil prices will continue to be under pressure due to market concerns that the global economy will enter a recession, when demand shrinks. Commerzbank said in a report:
"Brent crude has fallen significantly below $100/barrel this week. Oil prices are likely to continue to slide given that concerns about an economic recession may not abate for the time being."
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