Oil prices have taken to new heights after it was revealed that US President Joe Biden failed to persuade Saudi Arabia and the UAE to increase their oil output into the global market.
The price of oil rose on Monday after US President Joe Biden left West Asia without striking a deal with Saudi Arabia on Riyadh pumping out more oil into the global oil market.
Biden traveled to Saudi with hopes of persuading Saudi Arabia to promise to increase its oil output in a bid to relieve the pressure on the global supply chain.
Following his meeting with Saudi Crown Prince Mohammed bin Salman, Biden stated that he is confident that Saudi officials will support an increased oil supply in the coming weeks. However, Saudi officials tempered expectations, only stating that the Kingdom would do whatever was necessary to balance the market if there was a supply shortage.
Brent crude rose 2.6% to $103.88 after Saudi Foreign Minister Prince Faisal bin Farhan shut down speculation about an increase in oil output.
Officials at a US-Arab summit on Saturday did not discuss oil, he said, noting that OPEC+ nations would continue assessing market conditions and act accordingly.
Biden is now set to face criticism at home, where he is already dealing with low approval ratings, soaring inflation, and party frustration over his stalled legislative agenda and the Supreme Court’s ruling overturning abortion rights.
Saudi Arabia and the United Arab Emirates have been viewed as the only two countries in the world’s producer group, the Organization of Petroleum Exporting Countries, that have some spare capacity and could help increase global deliveries.
United Arab Emirates Crown Prince Sheikh Mohammed bin Zayed told French President Emmanuel Macron in late June that Saudi Arabia and the United Arab Emirates could barely increase oil production.
Saudi Arabia currently produces 10.5 million BPD and has a nameplate capacity of 12.0 million-12.5 million BPD, allowing it to increase output by 2 million.
The UAE produces approximately 3 million BPD, has a capacity of 3.4 million, and is working to increase it to 4 million BPD.
If the OPEC+ countries could increase their supply, then the pressure would ease at the pumps where drivers have been hit with record-high gas and diesel prices.
Energy prices rose so high that the government asked the Competition and Markets Authority to examine the market, and its initial findings sparked concerns over the margins made by refineries.
Brent crude prices have decreased from the record high of $130 in March, which they hit during the early days of the Ukraine war.
The easing of oil prices has been steady for five weeks now as concerns over the potential for a global recession caused investors to steer clear of commodity markets.
Europe is looking for ways to replace up to 2 million BPD of Russian crude and 2 million BPD of refined products that were imported from Moscow prior to the military operation in Ukraine.
In March, as brent prices peaked, the UAE asked Western nations to be “reasonable” in their expectations, reiterating its commitment to the global OPEC+ energy alliance.
Oil prices fell over 3% as investors are worried that the Federal Reserve’s rate rises would send the US economy into recession, lowering demand for fuel.
Attempting to curve the prices of oil in the US, Washington has been actively using its Strategic Petroleum Reserve (SPR) for over a year. Bloomberg reported this news last month and highlighted that the government cannot continue to tap into the reserves in the long run.
At the current pace of oil production, the reserves will shrink to a 40-year low with only 358 million barrels remaining by the end of October. Last year, the SPR location in Texas and Louisiana reportedly contained 621 million barrels. According to official information, the US is set to stop extractions from SPR in October.