The United States is actively engaging with Saudi Arabia to secure a stable and affordable energy supply for global markets, according to a statement by National Security Advisor Jake Sullivan.
The announcement, made on Friday, follows estimates by the International Energy Agency (IEA) indicating that extended oil production cuts by Saudi Arabia and Russia through the end of 2023 will lead to a significant market deficit in the fourth quarter of this year due to robust demand.
During a White House briefing, Sullivan confirmed that U.S. President Joe Biden had engaged in a brief exchange with Saudi Crown Prince Mohammed bin Salman at the Group of 20 (G20) summit held in New Delhi earlier in September.
While the primary focus of their discussion was the unveiling of a new economic corridor connecting India, the Middle East, and Europe via rail and sea, energy security remained a key topic of interest.
OPEC and its allies, collectively known as OPEC+, initiated production cuts in 2022 to stabilize the energy market.
As the group responsible for nearly 40 percent of global crude oil production, OPEC+’s policy decisions significantly influence oil prices.
This month, benchmark Brent crude surpassed $90 per barrel for the first time in the year following Saudi Arabia and Russia’s decision to extend their combined 1.3 million barrel per day (bpd) production cuts until the end of 2023.
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While OPEC+ members have reduced output by over 2.5 million bpd since the beginning of 2023, this decline has been offset by increased supplies from non-alliance producers, including the United States, Brazil, and Iran, which remains under sanctions.
However, the IEA’s monthly oil report warns that the loss of OPEC+ production, starting in September, will create a significant supply shortage throughout the fourth quarter.
The IEA points out that without production cuts at the beginning of the next year, the balance could shift towards a surplus, with stock levels uncomfortably low.
This situation increases the risk of heightened volatility in an already fragile economic environment.