Saudi Arabia mulls pumping more oil to offset lost Russian production
Summary
The kingdom would tie the move to greater security guarantees from the US, said Persian Gulf officialsSaudi Arabia is considering pumping more oil than planned to offset a decline in Russian crude production, a move the kingdom would tie to greater security guarantees from the US., said Persian Gulf officials familiar with the discussions.
The move would represent a significant shift for the Saudis, who have resisted calls from the U.S., U.K. and other Western countries to pump more oil to help reduce a price boom resulting from Russia’s invasion of Ukraine. The discussions come after a flurry of diplomacy between Washington and Riyadh, with senior U.S. officials traveling to Saudi Arabia in recent weeks to broker a deal, officials familiar with the discussions said.
The Saudis are planning to discuss the new output plan at a meeting Thursday between the Organization of the Petroleum Exporting Countries, which it leads, and a coalition of other producers led by Russia—together known as OPEC+. That group has so far been dedicated to a series of small monthly output increases that have done nothing to stop oil prices from surging above $100 a barrel since the Feb. 24 invasion.
However, Russian oil output has decreased about 1 million barrels a day since the start of the war, as Western sanctions batter its economy. While its exports have held up over that time, some OPEC officials believe it will be difficult for Russia to keep pumping at the same level now that the European Union has agreed to ban most of Moscow’s oil imports.
According to the Persian Gulf officials familiar with the discussions, the Saudis would consider increasing their oil output more than planned if Russian output continues to decline. Their decision would also depend on President Biden’s planned visit to the Middle East at the end of this month, which could include his first meeting with Saudi Crown Prince Mohammed bin Salman, the officials said.
Saudi Arabia and another major Gulf OPEC producer, the United Arab Emirates, say they want Washington to beef up their security after a string of attacks by Yemeni rebels and threats by Iran.
It couldn’t be determined whether OPEC+ will make a decision on a new production plan for Saudi Arabia on Thursday, or whether it will stick to its current plan until the Russian production picture becomes clearer.
OPEC delegates said any extra Saudi increases would have to be agreed to collectively. They said OPEC+ could suspend Russia’s obligations to pump more oil or meet the output targets agreed to under the current collective plan, an exemption that is also extended to countries like Iran and Libya, where there are production disruptions.
