Biden Urges OPEC+ To Raise Output Amid Soaring Crude Prices

Saudi Aramco has raised the August official selling prices of crude to Asia, as the oil market tightens, sparking fears of another oil price war and prompting the Biden administration to call on OPEC to settle its internal differences and start bringing more oil to markets, Bloomberg has reported, citing administration insiders.

Aramco has set the August OSP for Arab light at $2.70/barrel, up 80 cents per barrel from July’s price, Reuters reports, while the OSP to the United States was set up 20 cents a barrel for August.

Rising oil prices and pain at American gas pumps have prompted Biden to step into the fray. This is the latest development in a drama that actually began last year but only escalated last week, when the United Arab Emirates refused to vote for an extension of the OPEC+ production control deal without an adjustment of its baseline, noting that the baselines for the current agreement are from November 2018 which is simply, too far back in the past.

The UAE, which is OPEC’s third-largest producer after Saudi Arabia and Iraq, has a production capacity of some 4 million bpd but under the OEPC+ deal from last year, its actual output was capped at 2.59 million bpd until the end of 2020, rising to 2.74 million this year.

“We cannot extend the agreement or make a new agreement under the same conditions. We have the sovereign right to negotiate that,” Emirati oil minister Suhail Al-Mazrouei told CNBC on Sunday.

Then, on Monday, OPEC’s secretary-general Mohammed Barkindo announced the meeting planned for that day to settle the differences has been cancelled. The date of the next meeting remains to be announced. Naturally, this pushed oil prices even higher, suggesting the rift between Saudi Arabia, the de facto leader of the OPEC group, and UAE, until recently its staunchest ally in the region, ran deeper than previously assumed.

The White House is “closely monitoring the OPEC+ negotiations and their impact on the global economic recovery from the COVID-19 pandemic,” according to a spokesperson quoted by Bloomberg. “Administration officials have been engaged with relevant capitals to urge a compromise solution that will allow proposed production increases to move forward.”

Meanwhile, the financial adviser to the Iraqi prime minister has warned that there is a danger of a price war within the cartel.

"In the absence of coordination and understandings between OPEC producers, the beginnings of a price war will be formed again," Mazhar Mohammed Saleh said, as quoted by Reuters, yesterday.

"The increases in production within the OPEC member countries must be carried out with caution and in high coordination among the member countries themselves to avoid any potential glut in the crude oil supply market that may cause undesirable price imbalances," he added.