Opec+ Oil Cut Sparks Tremors In Washington, Ripples Round Iran

Market analyst Oilprice.com wrote Friday in its ‘Oil and Energy Insider’ bulletin that the decision had “placed the Biden Administration between a rock and a hard place, with oil prices climbing ahead of the mid-terms [November 8 US Congressional elections] and very few viable options to counter it.”

Biden’s press secretary Karine Jean-Pierre accused Opec+ of “aligning with Russia.” Biden himself said Wednesday the government would release an additional 10 million barrels in November from US strategic reserves, although the Strategic Petroleum Reserve (SPR) is already at its lowest level, 416 million barrels, since 1984.

The Wall Street Journal piled on criticism with an editorial Wednesday citing earlier lobbying efforts by senior Biden officials to dissuade the Saudis from production cuts. The Journal noted that the prospect of higher gasoline prices before the November 8 Congressional election had “sent the White House into overdrive.” The paper concluded that the Saudis “don’t seem to think risking relations with the US is all that big a deal” and had put “friendly relations with Russia above their ‘reputation’ in the US.”

Biden’s Democrats had been more optimistic, especially as oil prices eased in the summer, over their prospects for the November elections. But even before the Opec+ decision, there were encouraging signs for Republicans, including so-called “election deniers” close to Donald Trump sharing the former president’s unsubstantiated claims that the 2020 presidential election was rigged.

A shift away from the Democrats would likely increase voices in Congress critical of Biden’s efforts to revive the 2015 Iran nuclear deal, the JCPOA (Joint Comprehensive Plan of Action). At the same time, reviving the deal, and lifting US ‘maximum pressure’ sanctions targeting Tehran’s crude exports, would bear down on oil prices with perhaps an extra 1.5 million barrels a day (b/d) of Iranian oil reaching world markets.

$100 a barrel?

In the meantime, more expensive oil boosts Iranian revenues, albeit on the lower prices Tehran receives from sales of around 750,000-900,000 b/d, mainly to China exported in the face of tightening US sanctions.

In Tehran, Arman newspaper Saturday played down expectations of higher prices, although its headline noted that Opec+ aimed at an oil price of $100 a barrel. The $100 level is built into the Saudi strategic plan, Vision 2030. With the benchmark Brent crude at around $98 a barrel Friday, analysts are unsure how upward price pressure from lower production will balance downward pressure of recession fears.

Biden’s July trip to Israel and Saudi Arabia was widely portrayed as creating a new security alliance directed largely at Iran and extending the ‘normalization agreements’ made with Israel by the United Arab Emirates and Bahrain. But both Saudi Arabia and Israel have refused to follow the US line over Russia, with Riyadh coordinating with Moscow over oil production and the Israelis refusing to supply Ukraine with weapons given their own good relations with Moscow.

Washington broadsheet opinion

The Wall Street Journal, although a staunch supporter of close US ties with the Saudis and critical of the JCPOA, mocked Biden in its Wednesday editorial. “Mr Biden called Saudi Arabia a ‘pariah’ during the 2020 campaign, delayed a planned arms shipment, and continues to pursue a nuclear deal with Iran that would give the Saudis’ main enemy hundreds of billions of dollars to promote terrorism and other trouble. The President had to go hat in hand to the Saudi Crown Prince in July to ask for more oil production, and all he got was a lousy fist bump.”

The Washington Post piled in Friday, with an editorial arguing Biden was “begging foreign dictators to increase production” not only with the Saudis but by “preparing to lift sanctions on Venezuela’s narco-socialist dictatorship.” The Post said the US 264 billion barrels of untapped oil should be “unleashed” by ending Biden’s “war on fossil fuels at home.” Over half these US reserves require fracking, which is banned in much of Europe due to its heavy contribution to global warming, use of toxic chemicals, and seismic unpredictability.