The United States, through its National Security Advisor Jake Sullivan, has confirmed ongoing senior-level discussions with Saudi Arabia focused on maintaining stable and affordable global energy supplies. This dialogue reflects the pivotal role of Saudi Arabia in the international energy market and the impact of its policies on global oil prices.
Sullivan, speaking at a White House briefing, disclosed that President Joe Biden had a brief interaction with Saudi Crown Prince Mohammed bin Salman at the G20 summit in New Delhi. Their conversation touched upon the development of a new economic corridor proposed to connect India, the Middle East, and Europe, facilitating trade and transportation via rail and sea routes.
The backdrop of these engagements is the recent decision by OPEC+ (Organization of Petroleum Exporting Countries and its allies) to extend oil output cuts through the end of 2023. OPEC+, led by Saudi Arabia and Russia, began these supply restrictions in 2022 to support the global energy market. As OPEC+ is responsible for about 40% of the world’s crude oil production, its decisions significantly influence oil prices.
The impact of OPEC+’s policy became evident when benchmark Brent crude prices surpassed $90 a barrel for the first time in 2023, following the announcement that Saudi Arabia and Russia would continue their joint production cut of 1.3 million barrels per day (bpd).
According to the International Energy Agency (IEA), these output curbs will likely create a substantial market deficit in the fourth quarter of 2023 due to high demand. While increased supplies from non-OPEC+ countries like the U.S., Brazil, and Iran have initially compensated for the production cuts, the IEA forecasts a significant shortfall in supply from September onwards.
The IEA also anticipates a shift to a surplus in the market at the beginning of the following year but cautions that low stock levels could lead to heightened volatility in an already fragile economic environment.
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