Biden administration declares truce over Saudi OPEC row – WSJ

26 Jan 2023

Quantum Commodity Intelligence - Months after the White House vowed to punish Saudi Arabia for cutting oil output in defiance of American wishes, the Biden administration has ended its talk of retaliation against the Kingdom, according to a Wall Street Journal report published Thursday.

Officials instead point to congressional measures seeking to limit future defence cooperation as a chief repercussion for the OPEC+ production decision in October, which the administration viewed as a potential boon for Russia's war in Ukraine and a political blow to President Biden ahead of last year's midterm elections.

The change highlights how few options are available to US policymakers amid intensifying competition with Russia, the report noted.

A senior State Department official said the determination by OPEC+, spearheaded by Saudi Arabia, to cut output by 2 million bpd had a lasting negative impact on the United States' relationship with the Kingdom even though the feared spike in world oil prices did not materialise.

The decision by OPEC and its allies to slash oil production was viewed as a major snub by the US, with rumours that Washington was set to hit back at the producer alliance, including pushing legislation aimed at breaking up what it considers an unlawful cartel.

"The OPEC Plus announcement was consequential to the relationship itself and the tenor of the relationship," the official said, speaking anonymously to discuss internal deliberations.

"On the other hand, this relationship matters. Our work together is not done as a favor to Saudi Arabia; when you look at the actual cooperation that the United States and Saudi Arabia (are) engaged in, it advances US interests."

For its part, OPEC and Saudi Arabia repeatedly said at the time the decision was taken for economic reasons based on oil supply and demand fundamentals.

Prince Faisal bin Farhan, the Saudi foreign minister, said the OPEC+ decision was purely economic and had no political dimensions, adding the alliance was seeking to stabilise energy markets and advance the interests of producers and consumers.

Middle East benchmark Dubai prices briefly spiked to over $95/b after the October OPEC+ announcement but quickly went into a downward spiral, including hitting a 2022 low of $71.81/b on 12 December, largely vindicating the OPEC+ decision.