Oil futures bounced Friday, but remained on track for hefty weekly losses, after a news report said the U.S. doesn’t expect Saudi Arabia to immediately boost production during President Joe Biden’s visit to the kingdom.
West Texas Intermediate crude for August delivery
rose $2.12, or 2.2%, to $97.90 a barrel on the New York Mercantile Exchange. The U.S. benchmark is headed for a 6.6% weekly fall.
August natural gas
was up 3.8% at $6.854 per million British thermal units.
Biden arrived in the Saudi port city of Jeddah on Friday, greeting Saudi Crown Prince Mohammed bin Salman with a fist bump. Biden was scheduled to meet with King Salman bin Abdulaziz al Saud and participate in a working session with the crown prince and Saudi ministers. On Saturday, Biden was slated to participate in a summit meeting of Gulf nation leaders.
The visit is widely seen as an effort by Biden to reset the U.S. relationship with Saudi Arabia.
Citing a U.S. official, Reuters reported that Washington doesn’t expect to see Saudi Arabia immediately boost production, with expectations instead centered around an Aug. 3 meeting of OPEC+, made up of the Organization of the Petroleum Exporting Countries and their allies.
Biden, in his 2020 presidential campaign, had vowed to treat Saudi Arabia like a pariah. In February 2021, the White House cleared the release of an intelligence report that determined that the crown prince had ordered the operation that led to the death of journalist Jamal Khashoggi in 2018.
The New York Times on Thursday reported that Martin Indyk, a former diplomat who served in the Clinton and Obama administrations, had said that while exact amounts were uncertain, the Saudis were expected to increase production by around 750,000 barrels a day, with the United Arab Emirates boosting output by 500,000 barrels a day for a combined 1.25 million barrels a day.
Saudi Arabia and the United Arab Emirates are seen as the only OPEC+ members with the spare capacity available to meaningfully raise output, but analysts have questioned how wiling they would be to significantly tap into that cushion.
“We believe that any supply additions from the Kingdom or any other Middle Eastern producers will be incremental and fall well short of the 1.25 mb/d figure cited yesterday by the New York Times,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
“While we believe that there will be an additional barrels ask from the American administration, the ramp up from Saudi Arabia and UAE will be gradual in order to preserve the slim spare capacity shock absorbers,” she wrote.
Croft said any increase would likely be done within the framework of the existing OPEC+ agreement that runs through December “and could entail compensating for the countries that have consistently failed to meet their production targets —namely Nigeria and Angola, which are producing a combined 930 kb/d below their quotas.”
Rising fears of a recession have been blamed for a sharp retreat for crude which saw both WTI and Brent sink below the $100-a-barrel threshold, with the U.S. benchmark on Thursday temporarily erasing all of the rise seen following Russia’s Feb. 24 invasion of Ukraine.