Amos Hochstein told the Financial Times that the level of collaboration between the US and Gulf producers, including Saudi Arabia, had been “very strong” over the past two years.
“Oil has been weaponised from time-to-time since it became a traded commodity, so we’re always worried about that, working against that, but I think so far it hasn’t,” he said in an interview.
“We have two active wars in the world, one involving the world’s third-largest producer [Russia], the other in the Middle East where missiles are flying near where oil is produced, and yet prices are near the lower point of the year.”
That showed “we are managing it fairly well, but we can never rest and it’s an evolving situation”, Hochstein said.
“The collaboration and co-ordination between producers and consumers over the past couple of years has been very strong in trying to prevent energy shocks,” he added.
The leading Gulf state members of the Opec+ cartel have rejected calls from Iran for an embargo in protest at Israel’s military tactics in Gaza as it pursues Hamas.
But people familiar with the thinking of Saudi Arabia, the world’s top oil exporter, say a drop in oil prices to a four-month low of $77 a barrel last week and mounting anger among members over Gaza could contribute to a decision to make further cuts to oil supplies.
Riyadh is expected to prolong voluntary oil production cuts into next year when Opec+ members meet in Vienna on November 26, and a production cut of up to 1mn barrels a day, about 1 per cent of global supplies, could be on the table.
Saudi Arabia’s energy minister Prince Abdulaziz bin Salman, the half brother of Crown Prince Mohammed bin Salman, the nation’s day-to-day leader, has led the Opec+ group in cutting production since October 2022 despite pushback from the White House.
People close to Saudi Arabia’s thinking have stressed that no final decision had yet been made and emphasised that any public statements by the country’s energy minister are likely to try to keep the focus on the oil market, rather than the Israel-Hamas war.
Riyadh routinely insists its decisions are based on market conditions, not political considerations.
Prince Abdulaziz recently hit out at hedge funds that have increased their bets against oil, amid expectations that the market may move into a small surplus next year because of the weak global economy and rising supplies outside Opec.
Saudi Arabia has joined other Arab states in condemning Israel’s war against Hamas in Gaza, where more than 13,000 people have been killed, according to Palestinian officials, and calling for an immediate ceasefire.
This has put the US’s Arab allies at odds with the Biden administration, which has staunchly backed Israel’s military offensive after Hamas’s devastating October 7 attack killed about 1,200 people, according to Israeli officials. The Palestinian Islamist group also seized about 240 hostages.
Hochstein declined to comment on the possibility of Opec+ extending the production cuts, or the Biden administration’s conversations with Saudi Arabia and other producers.
However, he said over the past two years Washington had been “in consistent and regular contact on a whole host of issues”, adding that “things are very strong”.
“I think we’ve reached an understanding with producers in the US, producers in the Middle East and around the world that there is a limit to when prices go to a certain point, negatively affect global economic growth and ultimately affect them,” Hochstein said. “They know our position fairly well, and I think I understand theirs. We’re not always going to agree, but the point is we can work together.”
Relations between Washington and Riyadh were strained after President Joe Biden took office vowing to reassess US relations with the kingdom and not engage with Prince Mohammed.
But they improved as Saudi Arabia and Washington negotiated a deal that would have led to the kingdom normalising ties with Israel in return for a US security pact and co-operation on its nuclear power ambitions.
The Israel-Hamas war upended that process, but both Saudi and US officials have hinted that in the longer term they could eventually seek to build on those negotiations.
(Financial Times, November 19, 2023)