Biden Mulls Options After OPEC+ Moves to Cut Oil Output
Biden mulls options after OPEC+ moves to cut oil output. OPEC+’s decision to slash oil production has the White House considering responses that could include measures aimed at breaking the cartel’s hold on markets or limiting U.S. oil exports should shortages emerge.
“There are a lot of alternatives, and we haven’t made up our minds yet,” Biden said to reporters Thursday outside the White House.
The cutback is the latest dilemma for President Biden, who has sought to transition the U.S. away from fossil fuels while at the same time keeping consumer prices in check.
New Oil Legislation
Legislation (NOPEC) that would allow the U.S. to sue OPEC nations is being considered as a possible response to the oil cartel’s production cut this week that benefited Russian President Vladimir Putin, said Senate Majority Leader Chuck Schumer (D-N.Y.) on Thursday.
Some are pitching bills that would potentially seize the assets that OPEC member countries own in the U.S., or mandate the removal of U.S. armed forces from Saudi Arabia and the UAE.
On and Off the Roller Coaster
A long fall in gasoline prices has started to reverse, and this week’s OPEC decision to cut oil production by 2 million barrels a day threatens to push prices higher again just weeks before the Nov. 8 midterm elections, the WSJ reports.
Brent crude, the international benchmark, was hovering just below $95 per barrel on Friday morning, up about 6% since Monday.
Goldman Sachs raised its 2022 price forecast for Brent crude from $99 to $104 per barrel. The increase was driven by the OPEC+ announcement.
Although the 2-million-barrel figure is nominal and the actual output cut would be smaller, at around half that, the bank believes the physical oil market is tight enough to justify such price forecast updates.
On a quarterly basis, Goldman sees Brent trading at $110 this quarter and rising to $115 per barrel in the first quarter of 2023.
The bank’s analysts commented that such a deep cut would prompt a response from the United States and that this response would most likely be a further release of strategic reserve crude.
According to Goldman, even the International Energy Agency might join the reserve release to keep a lid on oil prices.
"The oil market's buffers (stocks and spare capacity) remain critically low, and higher prices remain the key viable, long-term solution to increased inventories in the short term and higher supply capacity medium term," Goldman analysts said.
“The royal Saudi family has never been a trustworthy ally of our nation,” said Sen. Dick Durbin (D-Ill.).
However, OPEC claims it's decision had peaceful intentions.
OPEC chief
Output cuts will leave room to deal with future crises. OPEC+’s decision to cut their output targets by 2 million barrels per day (bpd) will leave the countries able to tap more supplies in the event of future crises, OPEC Secretary General Haitham al-Ghais said on Al Arabiya TV, according to Reuters.
“This was not a decision from one country against another, and I want to be clear in saying this, and it's not a decision from two or three countries against a group of other countries,” Ghais told the station. “There are strong indicators that there is a high possibility that recession will happen, we decided in this meeting to be pre-emptive.”
Ghais did, however, recognize the decision did come at an ironic time.
Sanctions on Russia
Regarding sanctions and a coming cap on the price of Russian oil to be deployed by the European Union (EU), al-Ghais said he was unable to comment.
“The truth is, the shape of these proposed sanctions is not quite clear, and how they will be implemented is also unclear, so we cannot comment,” he said.
More on oil:
Gas Pipelines from Russia to Europe Suffer Leaks; Coincidence?
Russian Oil Ban on the Horizon, No Near-Term US/UK Trade Deal
DOE Announces Plan to Replenish Tapped Oil Reserves
