U.S. officials are bracing for another potential oil price surge in December, if a European embargo on Russian oil goes into effect and the Saudis refuse to increase production to make up for the anticipated drop in supply.
Saudi Arabia issued a warning shot aimed at the U.S. over crude oil and supply agreements.
Oil Market Manipulation
Prince Abdulaziz bin Salman, the Kingdom’s oil minister, accused unnamed countries of using their emergency oil reserves to “manipulate markets rather than helping with shortages of supply.”
The remarks come after the Biden administration authorized the release of another 15 million barrels of crude from the U.S. Strategic Petroleum Reserve (SPR) as it tries to curb elevated gasoline prices in the wake of production cuts from OPEC+.
“We, as Saudi Arabia, decided to be the maturer guys,” he told the Future Investment Initiative Forum, otherwise known as Davos in the Desert. “It is my profound duty to make it clear to the world that losing emergency stock may become painful in the months to come. Running out of capacity has a much dearer cost than what people can imagine.”
The Saudis say the cuts are an attempt at balancing the market, which is not lacking any more crude, but is rather suffering from a lack of refining capacity, a crisis in the natural gas market and too rapid of a transition to renewables that weighs on current hydrocarbon investment.
President Biden Responds
The American side is still in the middle of formulating a clear policy stance, though Biden has said “there will be consequences” for U.S./Saudi relations. The administration is particularly concerned about the Kingdom’s growing ties with Russia and China, and market volatility that is expected once a European oil embargo goes into effect on Dec. 5.
U.S. officials accuse Saudi Arabia of flip-flopping on oil production. The Biden administration believed it had reached a secret deal with Riyadh over the summer to boost oil production and lower energy prices, the New York Times reports.
The Saudi-led OPEC+ instead said it would cut production, leaving American officials fuming at what they said was a broken promise.
More on oil:
Biden to Tap Final 15 Million Barrels of Oil Reserves, but Could Go Further
Biden Mulls Options After OPEC+ Moves to Cut Oil Output
