By Barani Krishnan
Investing.com -- Crude prices settled at almost $120 a barrel on Friday after President Joe Biden played down the likelihood that he will travel to Saudi Arabia to meet the kingdom’s Crown Prince Mohammed bin Salman, who would be key to deciding whether OPEC puts out more barrels to provide relief to a market choked by sanctions on Russian oil.
“I have no direct plans at the moment to go to Saudi Arabia, but there is a possibility I will go to the Middle East,” Biden told reporters at the White House.
Brent, the global benchmark for crude, settled up $2.11, or 1.8%, at $119.72 for a barrel meant for August delivery. Earlier, it reached a session high of $120.05. For the week, Brent settled the week up 0.2%, finishing in the positive for a third straight week.
WTI, the benchmark for US crude, settled up $2, or 1.7%, at $118.87 per barrel, after an intraday peak at $119.41. For the week, it rose about 3%.
Brent and WTI settled up on Thursday despite headlines of a potential meeting between Biden and the Saudi crown prince, known popularly by his initials MbS. The reports said the president would be traveling to Riyadh for a summit with Gulf Arab leaders under plans drawn up by the State Department.
The reports came just after OPEC+ — which groups the original 13 members of the Saudi-led OPEC, or the Organization of the Petroleum Exporting Countries, with 10 non-OPEC oil producers steered by Russia — said it will raise output by 648,000 barrels per day in July and 648,000 bpd in August.
That output was remarkably higher than the 432,000 bpd increments the group had been doing month after month over the past year. It was seen as the first sign of willingness by Saudi Arabia and others in OPEC+ to open their spigots more freely, especially after the European Union announced this week a ban of most Russian oil products that could alienate at least another 2 million barrels per day of supply.
After Thursday’s rally, crude prices barely fell on the OPEC+ news. And here’s probably why: the increments in July and August are to be divided proportionally across the group’s existing members and collaborators.
Included in the pact was Russia, which has already lost one million barrels in daily production due to sanctions, and countries such as Angola and Nigeria that have repeatedly failed to meet prescribed output targets.
Amrita Sen, co-founder of the Energy Aspects consultancy in London, said the real production boost over July-August would amount to around 560,000 barrels daily compared to the scheduled 1.3 million — because most in OPEC+ have already maxed out their production.
"These volumes will barely make a dent to the deficit in the market," she said in comments carried by Reuters.
Despite pressure from the West that it abandons Russia from the OPEC+ pact, Saudi Arabia has held on to its ally, saying it did not believe oil exports should be politicized over the Ukraine crisis.
That might be a reason for Biden not wanting to make a visit to Riyadh at this point, analysts said.
“He’s basically holding on to what he has said all long about MbS,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “He’s also probably looking to OPEC doing some real meaningful production hike instead of one that will not move the needle down at all on gas prices.”
The average price of gasoline at U.S. pumps hit all-time highs near $4.72 a gallon this week, up from $3.04 a year ago. Diesel averaged $5.56 a gallon, up from $3.19 a year ago.
Biden, when asked about the likelihood of a direct meeting with MbS, said: “Look, we're getting ahead of ourselves here. I'm not going to change my view on human rights, but as president of the United States, my job is to bring peace, and if I can bring peace, that's what I'm going to try to do. What I want to see is that we diminish the likelihood that there's a continuation of some of the senseless wars between Israel and the Arab Nations and that's when I'm focused [on].”
U.S. diplomats had apparently worked for weeks on organizing Biden's first visit to Riyadh after two years of strained relations over the slaying of Saudi-turned-U.S. resident Jamal Khashoggi and disagreements over human rights, the war in Yemen and US weapons supplies to the kingdom.
Just three months ago, MbS had reportedly refused to even speak on the phone with the president, who regarded the crown prince as a "pariah" for his alleged role in the 2018 killing and dismembering of Khashoggi, a Washington Post journalist who had severely criticized the crown prince.
The White House had appeared to mend fences with Riyadh on Thursday, when it said it recognized MbS’ role in extending a ceasefire in Yemen. It also said it appreciated the Saudi role in achieving the OPEC consensus on higher oil exports.
But Biden thought differently when asked about it on Friday. “The OPEC announcement on increasing production [was] positive, but I'm not sure if it's enough,” he said.