President Joe Biden's administration is chiding Opec+ members for planning to cut output by more than 1.1mn b/d but is holding back on criticizing Saudi Arabia and other members of the producers coalition.
Biden has yet to raise the types of criticisms he made last October, when he said there would be "consequences" against Saudi Arabia for its part in Opec+'s earlier output cut. The White House instead has offered a muted critique that lower output is "inadvisable" given global efforts to tame inflation and uncertainty from the war in Ukraine.
"We don't think that production cuts are advisable at the moment given market uncertainty," White House foreign policy communications co-ordinator John Kirby said. "And we made that clear."
The White House was offered a "heads up" about the Opec+ production cut, Kirby said. Biden over the last two years pressured Opec+ not to cut output because of concerns it would drive up inflation. The administration declined to say if it made a similar lobbying effort before the latest production cut.
But the administration sees markets as being in a different place than a year ago, when crude was trading at $110-120/bl after Russia's invasion of Ukraine. Nymex WTI crude prices today jumped 6pc to about $80/bl as of 12:23pm ET. Kirby said the administration had "tough conversations" with Saudi Arabia the previous time Opec+ cut output, and said it was focused on moving forward with its relationship with Riyadh.
"Saudi Arabia is a strategic partner, as they have been for 80 years," Kirby said. "We don't always see eye-to-eye on everything, but there are many things that are of mutual concern to us."
The Opec+ production cut comes at a time when markets were already expecting a deficit in global oil supplies to emerge in the second half of the year. The latest cut risks "exacerbating those strains" and pushing up prices at a time when high inflation is already hurting consumers, the Paris-based energy watchdog IEA said.
Biden last year ordered the emergency sale of 180mn bl of crude from the US Strategic Petroleum Reserve (SPR) in response to high prices, and it is drawing down another 23mn bl over the next two months as part of a congressionally mandated sale. The administration has indicated it wants to partially refill the SPR at a targeted price of $67-72/bl, but US energy secretary Jennifer Granholm last month effectively ruled out starting to buy crude to refill the SPR this year, even though prices at the time were below $72/bl.
