By Barani Krishnan
Investing.com — Some say OPEC+ doesn’t like how the U.S. is influencing oil prices with its reserves. Others believe that alliance members are laughing at how the Biden administration has created a bigger hole for America through draining its emergency crude oil stockpiles. This could be because it might have a real need later for those supplies.
Saudi Energy Minister Abdulaziz bin Salman’s message to the United States on Tuesday seemed to have a combination of both — mild annoyance and derision — as he cautioned about the pitfalls of using the Strategic Petroleum Reserve (SPR) to keep a lid on market prices of both crude and fuel.
“It is my profound duty to make clear to the world that losing (releasing) emergency stocks may be painful in the months to come,” the minister, sometimes referred to by his initials as AbS, said at an industry conference in Riyadh.
AbS’ remarks also came right after the head of the International Energy Agency said its members have oil reserves available to conduct another round of releases if needed.
“We still have [a] huge amount of stocks to be released in case we see supply disruptions,” Fatih Birol, the executive director of the Paris-based adviser, said in a group interview at the Singapore International Energy Week Conference. “Currently it is not on the agenda, but it can come anytime.”
Birol also stated that tightening global liquefied markets and supply cuts by major oil companies have placed the world in the middle “the first truly international energy crisis.”
New York-traded settled at $85.32 per barrel, up 0.9% or 74 cents. It had fallen 1.6% in the previous two sessions.
London-traded settled at $93.52 per barrel, up 26 cents or 0.3% It dropped the same amount in the previous session.
President Joe Biden announced last week that an additional 15,000,000 barrels of the SPR were sold. This was in addition to the 180 million that his administration had released from the reserve over six months.
Brent dropped from a March peak of nearly $140 per barrel to the low $80s during September. In addition to a higher oil supply, the increased demand for fuel led to lower fuel prices. At one time, they were at record highs of over $5 per gallon. On Tuesday, an average gallon of gasoline at U.S. pump was $3.85 per gallon.
The additional SPR release (15 million barrels) is expected to coincide in the 2,000,000 barrels per day reduction in global oil supply announced by OPEC+ from November onwards.
The OPEC+ cut had initially triggered a sharp rise in crude prices. Brent was able to recover from a low of $83 for eight months, and is now near $100. OPEC+, which is led by Saudi Arabia and Russia as its largest ally, is led by Russia. OPEC+ has been trying reduce the impact of cuts on the burden on consuming countries. AbS said Tuesday that Saudi Arabian sales to Europe reached 950,000 barrels in September compared to 490,000. barrels the year before.
Biden, meanwhile is working to ensure that the upcoming OPEC+ production cuts do not push fuel costs up before the November 8 U.S. congressional elections. The use of the SPR has brought down the reserve’s stockpile by just 400 million barrels, the lowest level in 35-years.
Despite being strategic allies in energy and security, the relationship between the U.S. and the Saudis has been difficult since Biden took office. Relations between the U.S. and Russia and Saudi Arabia have fallen to their lowest point in decades. Biden approved sanctions against Moscow for the Ukraine conflict, while Riyadh was accused of supporting the Kremlin invasion.
Biden has said there will be “consequences” for the Saudi action while AbS sought to take the higher moral ground in the dispute on Tuesday, claiming the kingdom had been “the maturer” side in the spat.