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White House says Opec risks imperilling economic recovery

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The White House has said Opec+ risks imperilling the global economic recovery by refusing to speed up oil production increases and warned the US was prepared to use “all tools” necessary to lower fuel prices.

The move came after Saudi Arabia-led Opec and its allies such as Russia rejected US calls to help tame rising oil prices, insisting they would stick with a plan of only gradually increasing output, even as demand roars back from the depths of the pandemic.

“Opec+ seems unwilling to use the capacity and power it has now at this critical moment of global recovery for countries around the world,” said a spokesperson for Biden’s National Security Council.

“Our view is that the global recovery should not be imperilled by a mismatch between supply and demand.”

Oil prices are close to seven-year highs despite economic activity not yet fully recovering to pre-pandemic levels and higher energy costs stoking concerns about inflation. Brent crude oil prices slipped about 2 per cent after the meeting towards $80 a barrel.

US President Joe Biden has blamed Russian and Saudi oil supply restraint for a surge in US petrol prices, which have risen 60 per cent in the past 12 months.

Jennifer Granholm, the US energy secretary, told the Financial Times last month that a release of oil from the country’s strategic stockpiles was among “tools” the Biden administration could deploy to cool crude prices that have more than doubled in the past year.

Saudi Arabia defended its stance on Thursday saying the producer group was acting as a “responsible regulator” by only gradually increasing oil output by 400,000 barrels a day each month.

“What we have seen over the past few months again and again and again is that energy markets must be regulated otherwise things will go astray,” Prince Abdulaziz bin Salman, Saudi energy minister, said in an extended press conference.

The group sought to present a united front to the US, with energy ministers from Mexico to the UAE lining up to support the decision.

Opec+ said in a statement it wanted to “provide clarity to the market at times when other parts of the energy complex outside the boundaries of oil markets are experiencing extreme volatility and instability”.

Abdulaziz repeatedly referenced gas and coal markets, the prices of which have risen faster than oil this year, to justify the group’s actions but the explanation failed to satisfy the White House.

Saudi Arabia has long been one of Washington’s most important Middle Eastern allies but tensions are increasing with the Biden Administration.

Biden has refused to speak with Crown Prince Mohammed bin Salman, the heir to King Salman and day-to-day ruler of the country. The US released a declassified intelligence report in March that said the Crown Prince authorised the murder of Washington Post journalist Jamal Khashoggi.

Abdulaziz is the half brother of the Crown Prince and is seen as frustrated by the push by western countries to cut their reliance on fossil fuels while also asking the kingdom to raise oil production.

“The relationship between Saudi Arabia and the US is at risk of being strained as the latter is going full-bore to tackle climate change,” said Christyan Malek, head of oil and gas research at JPMorgan.

“But Saudi Arabia in this context needs to fund its own energy transition. And it’s looking for an oil price and a relationship which is conducive for that.”

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The White House has also said it is monitoring Russia’s actions in natural gas markets, as prices in Europe and Asia have soared fivefold this year. Some lawmakers in Europe and the US have blamed Moscow for exacerbating the gas price surge by restricting supplies to western Europe.

Bob McNally, head of Rapidan Energy Group and a former adviser to the George W Bush White House, said the decision by Opec+ could prompt a response from consumer countries.

“Given the complete rebuff by Opec+ and President Biden’s clear threats to respond, odds of a US if not an International Energy Agency strategic stock release are rising fast along with other retaliatory options,” he said.

Under the current plan, Opec+ will add 400,000 b/d every month until the end of 2022, restoring oil supply removed last year after the US cajoled Saudi Arabia and Russia to make record deep cuts to prop up an industry devastated by the pandemic.

Video: Jennifer Granholm on the challenges of transition to cleaner energy sources

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