US Presidential Administration Joe Biden found a way to solve two problems at once: to reduce Russia’s oil revenues, as well as reduce the rate of inflation in the United States. It is reported by Bloomberg with reference to sources in the administration and OPEC+.
According to the agency, the participants of the cartel, whose member is still Russia, see less meaning in their existence: oil prices are kept in many years of maximums, and there is no more meaning in reducing production, when the market is deficient. This is what the American administration wants to take advantage of this, trying to convince the leader of the cartel – Saudi Arabia, as well as the United Arab Emirates (UAE) to sharply increase oil production.
At the same time, sources close to the leadership of the Kingdom of Saudi note that Er-Riyad is still carefully calculating the options, not wanting to quickly take someone else’s side. The agency notes that the authorities of Saudi Arabia specially even sent the Minister of Energy of Abdulaziz Bin Salman al-Saud to the St. Petersburg International Economic Forum (PMEF) to “pose with Deputy Prime Minister Alexander Novak for joint photos.” Experts note that Riyadh balances between the allies, trying to achieve maximum benefit for himself.
At the previous meeting, OPEC+ Cartel at the direct pressure of Saudi Arabia has already increased production quotas for all members, but in fact, only the Kingdom and the UAE itself can actually increase production. The capacities that two states can increase account for only 2% of global production, but even such volumes of the world market will perceive with relief, since rising energy prices is one of the main reasons for the sharp inflation around the world, writes The Insider.
For the United States, an agreement with Saudi Arabia and the UAE will be the perfect solution to two problems at once. Russia will not only lose a significant part of its oil revenues, but will also lose its influence on OPEC and the oil market in principle. The extension of oil supply in the market will help the United States overcome the record level of inflation, which is currently a headache for the Biden administration.
At the same time, Russia itself began to lose its influence in the oil market. Due to pressure against the background of invasion of Ukraine, Russia is forced to reduce oil production. Based on the words of Alexander Novak, in the second half of 2022, oil production in Russia is awaited by a real collapse, which calls into question the fulfillment of obligations undertaken within the framework of OPEC+.