Page 7 - NorthAmOil Week 40 2022

NorthAmOil COMMENTARY NorthAmOil

the OPEC+ group’s 43.86mn bpd production Amid the shortfall on physical markets as sanc-
quota for October at 11mn bpd each, but while tions and supply chain issues persist, the tail is
Saudi Arabia has been able to produce around firmly wagging the dog.
this level of late, Russian output has fallen as In their joint statement, Sullivan and Deese
sanctions bite. reiterated the US Department of Energy’s
With both countries’ quotas now falling to intent to “deliver another 10mn barrels from
10.478mn bpd, there will be less pressure on the Strategic Petroleum Reserve to the market
Saudi Arabia to maintain production at lev- next month, continuing the historic releases the
els nearing all-time highs as prices sit in what President ordered in March.” This has delivered
Riyadh likely sees as a ‘middle ground’. Other around 850,000 bpd since June.
producers that have been ‘maxing out’, most They added: “The President will continue
notably Kuwait, will also welcome the respite to direct SPR releases as appropriate to protect
given issues in raising output. American consumers and promote energy secu-
rity, and he is directing the Secretary of Energy
Cuts to explore any additional responsible actions to
While OPEC+ will reduce their collective quota continue increasing domestic production in the
by the headline 2mn bpd, underproduction immediate term.”
among members will see output fall by around However, the SPR has reached its lowest level The SPR has
1-1.1mn bpd, according to Saudi Arabian since the mid-1980s and will continue to fall
Energy Minister Prince Abdulaziz bin Salman until the end of the year, and may drop below reached its
Al-Saud. 400mn barrels with more than half of this lowest level since
The group fell around 3.6mn bpd short of already accounted for under Congress-man-
its 43.856mn bpd quota with Iranian, Russian dated sales. This significantly limits the options the mid-1980s
and Venezuelan sales remaining constrained by available to the US in terms of further SPR
sanctions and Angola and Nigeria dealing with releases. and will continue
production issues. It was perhaps with this in mind that the
White House statement added: “In light of to fall until the
Action points today’s action, the Biden Administration will end of the year.
The output reduction – and consumers’ displeas- also consult with Congress on additional tools
ure – only serves to highlight the prescience of and authorities to reduce OPEC’s control over
Saudi Aramco CEO Amin Nasser’s recent repe- energy prices,” perhaps alluding to efforts to
tition of criticism that the challenges in supply- push forward the NOPEC bill which is aimed at
ing the market are largely borne of long-term targeting the group’s ability to steer the market.
upstream underinvestment. Such a move would need to pass through
Nasser has long been critical of the lack of Congress and should it be implemented, it
balance with which developed nations have would surely be the final nail in the coffin in
approached the energy transition while doing relations between Biden and Washington’s
little to reduce reliance on imports, all while key Middle Eastern allies Saudi Arabia and
criticising the regimes of exporting nations. the UAE.™

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