Riyadh's decision today to extend crude supply cuts will not affect US-Saudi cooperation or jeopardize a potential meeting between the leaders of the two countries later this week, the White House says.
The two governments have been working to arrange a meeting between President Joe Biden and the Saudi prime minister, Crown Prince Mohammad bin Salman, on the sidelines of the G20 summit of major economies in India on 7-9 September. A meeting has not been scheduled yet but the Saudis' crude announcement will not "move us one way or another in terms of engaging with leaders at the G20 summit," White House national security adviser Jake Sullivan told reporters today. "We'll make our decisions on (a meeting) on the basis of a far broader set of considerations than any one policy."
Saudi Arabia said it will extend the 1mn b/d cut in production, first implemented in July and later extended to August-September, by another three months, through the end of 2023. Russia separately said it would extend its 300,000 b/d cut to crude exports until year-end. The announcement moved front-month Ice Brent futures prices above $90/bl for the first time since November 2022.
"The most important thing that the President is focused on is just trying to do everything within his toolkit to be able to get lower prices for consumers at the gas pump in the US," Sullivan said. Keeping US retail prices from rising too much is the only metric of success of Biden's policy, rather than "which country is doing what, here or there," Sullivan said.
The Biden administration last year ordered a massive drawdown from the Strategic Petroleum Reserve in an effort to bring down US retail gasoline prices, which in June 2022 reached a record high — in nominal dollar terms — of $5/USG. The US worked with its G7 allies to craft a sanctions policy that kept Russian oil flowing at discounted prices to consumers in emerging economies, in an effort to prevent a supply shock.
Average US gasoline prices bounced higher in August, reaching a high for the year of $3.87/USG for the week ended 21 August, Energy Information Administration data show.
The White House denounced Riyadh for orchestrating a reduction in Opec+ production quotas in October 2022, but relations between the two governments have improved since then — largely because US gasoline prices remain below politically sensitive levels. "We have, obviously, regular engagement with the Saudis, at multiple levels, with their energy minister, with their leadership, and that will continue," Sullivan said.
"The thing that we ultimately stand for is a stable, effective supply of energy to the global markets, so that we can, in fact, deliver relief to consumers at the pump and, also, that we do this in a way that is consistent with the energy transition over time," he said.
Riyadh's defrosting of relations with its erstwhile regional arch-enemy Iran and the ceasefire in Yemen — considered priorities by the White House — have also helped improve US-Saudi relations. Washington and Riyadh are in talks on a possible deal, as Saudi Arabia is keen to formalize previously unwritten US defense guarantees for the largest Opec producer and the White House is pushing for Riyadh to normalize relations with Israel.
Senior US diplomats are visiting Riyadh this week to discuss potential contours of such an agreement, as well as the ongoing ceasefire in Yemen, but there is no "imminent breakthrough or action with respect to the question of normalization" of Saudi-Israel relations, Sullivan said.
