Will Biden Middle East Trip Yield Oil Results?

Enverus Intelligence Research (EIR) has cautioned about the limited benefits U.S. President Joe Biden’s trip to the Middle East will have on increased oil production or changes to crude prices.

In a new report, the company points out that OPEC spare capacity appears to have almost entirely eroded as oil production by the group has increased over the last year. EIR analysts argue that political pressure on major OPEC oil producers to increase supply as Russian oil is progressively sanctioned are therefore unlikely to yield immediate results.

“If President Joe Biden is hoping that his July trip to the Gulf will yield an immediate and significant tranche of extra oil supply from Arab Gulf producers, he will likely be disappointed,” Bill Farren-Price, the report author and a director at EIR, said in a company statement.

“A more likely outcome is that if talks go well, Riyadh commits to increase supply over the medium term,” he added in the statement.

The report also highlighted that a reported conversation between France’s President Emmanuel Macron and UAE leader Mohammed bin Zayed backs EIR's assessment that there is very little sustainable spare oil production capacity within OPEC countries. The report also outlined that, aside from sanctions-bound Iran, EIR reiterates its view that consumer pressure on OPEC countries for extra oil supply in the very near term is unlikely to produce positive results.

EIR analysts do, however, believe Saudi Arabia could increase supply towards its official 12 million barrel per day ceiling if it deploys additional rigs over six to 12 months, according to the report. Unless domestic refining is squeezed, stocks drawn from storage or direct-burn crude reduced, that capacity is not immediately available now, however, the report highlighted.

In a separate note sent to Rigzone earlier this month, Farren-Price stated that OPEC-10 oil production had fallen back in May with Nigeria and Iraq output declining and more than offsetting gains in Saudi Arabia and the UAE.

“President Joe Biden’s planned July visit to Saudi Arabia will set expectations for supply coordination later in the year,” Farren-Price said in a company statement at the time.

In a White House statement last month, White House Press Secretary Karine Jean-Pierre revealed that Biden will visit the Middle East region from July 13-16 “to reinforce the United States’ iron-clad commitment to Israel’s security and prosperity and attend a Summit of the Gulf Cooperation Council plus Egypt, Iraq, and Jordan”.

“He will also meet with counterparts from across the region, to advance U.S. security, economic, and diplomatic interests,” Jean-Pierre noted in the statement.

To contact the author, email andreas.exarheas@rigzone.com