USA and Saudis Discuss Energy Affordability

USA and Saudis Discuss Energy Affordability
The U.S. called Saudi Arabia on the eve of an OPEC+ meeting to highlight the importance of 'affordable energy', adding another element of uncertainty into the group's decision on production cuts.

(Bloomberg) -- The U.S. called Saudi Arabia on the eve of an OPEC+ meeting to highlight the importance of “affordable energy,” adding another element of uncertainty into the group’s decision on production cuts.

The cartel is heading into Thursday’s talks with several options up for discussion, including maintaining its existing production cuts or making a modest increase, delegates said. Rhetoric from the cartel’s top official had indicated a cautious approach, focusing on the fragility of demand and the risk of a Covid-19 resurgence.

Many OPEC-watchers had been expecting the group to roll over its production quotas for at least one month, so any deviation from that could be bearish. It remains to be seen whether the call from U.S. Energy Secretary Jennifer Granholm to her Saudi counterpart Prince Abdulaziz bin Salman could tip the balance in the another direction.

Brent crude, the international benchmark, rose 1.4% to $63.61 a barrel as of 9:52 a.m. in London.

I had a productive call with Saudi Energy Minister Abdulaziz bin Salman al-Saud today. We reaffirmed the importance of international cooperation to ensure affordable and reliable sources of energy for consumers. 1/

— Secretary Jennifer Granholm ‍⚧️ (@SecGranholm) April 1, 2021

A spokesman for the Saudi Energy Ministry had no immediate comment.

At the start of this week, the Organization of Petroleum Exporting Countries and its allies had been widely expected to maintain their output curbs for at least another month. Bolstering that view, the coalition’s technical experts lowered their demand estimates on Tuesday.

In his opening remarks at a ministerial panel on Wednesday, OPEC’s top official warned that oil demand remains fragile.

Follow our live blog when the meeting starts at about 2 p.m. in Vienna

“We should not be out smelling the flowers just yet,” Secretary-General Mohammad Barkindo told a committee of ministers that lays the ground for their main meeting, scheduled for Thursday. The oil market is “surrounded by uncertainties, including the prevalence of Covid-19 variants, the uneven rollout of vaccines, further lockdowns and third waves in several countries,” Barkindo said.

But as of Wednesday evening, before the U.S. intervention, the possibility of increasing production was among the options that may be considered, according to two delegates who asked to speak anonymously.

There aren’t just external calls to pump more oil. Saudi Arabia is also facing internal pressure from Russia and the United Arab Emirates, who appear more eager to restore production, said Helima Croft, chief commodities strategist at RBC Capital Markets LLC.

“Surprises can take many forms and the Saudi oil minister might look to give way to the other producers that are pushing for a production increase,” Croft said.


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