Can the end of Biden's trip to the Middle East "cool down" international oil prices?

　　China News Agency, Beijing, July 17th:

　　Author Liu Wenwen

　　With the conclusion of the "Security and Development" summit in Jeddah, US President Biden's trip to the Middle East also officially ended.

Since the beginning of this year, international oil prices have been soaring. Although there have been occasional corrections, the upward trend has not changed.

Can Biden's Middle East trip cool down oil prices?

　Oil prices have been falling frequently recently

　　Since the beginning of this year, the international oil price has been running at a high level, but it has fluctuated frequently recently.

International oil prices fell significantly this week, with both New York and Brent oil prices posting their biggest weekly declines in more than three months.

　　Analysis believes that the recent negative pressure continued, resulting in frequent "high" diving in oil prices.

　　On the one hand, under the influence of economic recession expectations, investors are worried that demand will be suppressed and widely sell oil, resulting in a significant drop in international oil prices.

　　On the other hand, the negative impact of a stronger dollar on oil prices continued to be released.

Recently, the U.S. dollar index once exceeded the 109 mark, and the exchange rate of the U.S. dollar against major global currencies rose sharply.

Crude oil denominated in U.S. dollars is under greater bearish pressure due to rising purchase costs, giving oil prices further downside.

　The overall situation of tight supply remains unchanged

　　Despite several short-term corrections recently, oil prices remain high overall, considering that the tight supply situation has not improved.

　　OPEC's first oil market outlook report for 2023 released recently said that market tightening conditions have not eased, and global oil demand growth is expected to outpace supply growth by 1 million barrels per day next year.

To fill the gap, OPEC needs to ramp up production significantly, but members are already far behind what is needed now due to insufficient investment and political instability.

　　Chen Shuxian, chief analyst of the petrochemical industry of Cinda Securities, analyzed that at present, the tight supply situation in the oil market remains.

Specifically, Saudi Arabia and the United Arab Emirates have the ability to increase production but have no obvious willingness to increase production; other OPEC oil-producing countries have the willingness to increase production but have no ability to increase production due to production decline; the recovery of shale oil in the United States is accelerating, but the increase in production is limited.

　　"Therefore, although the recovery of oil demand has slowed down, the global crude oil supply and demand gap still exists, and the high oil price is supported." Chen Shuxian said.

　　Han Zhengji, a crude oil analyst at Jinlianchuang, a commodity price monitoring agency, also said that as Russia began to implement a series of energy "anti-sanctions", the shortage of energy supply in Europe may continue to deepen.

　　"In addition, OPEC's monthly report shows that although production in June increased by 234,000 barrels per day from the previous month, its total production is still far below the agreed volume. In the political turmoil in Libya, Angola, Nigeria and other countries have limited production capacity due to insufficient investment and other reasons. In the context, the prospect of OPEC's production increase is still not optimistic. This will further provide support for oil prices." Han Zhengji said.

　　Could Biden's Middle East trip cool oil prices?

　　At present, the global oil price is high, and the American people have been overwhelmed.

The latest data from the U.S. Bureau of Labor Statistics showed that the U.S. consumer price index (CPI) rose by 1.3% month-on-month in June and a year-on-year increase of 9.1%, again setting a record high in 40 years.

　　Therefore, Biden has been racking his brains recently to suppress oil prices.

In addition to releasing reserves, it has also considered establishing a gasoline tax holiday, considering restricting fuel exports, and advocating a windfall tax on oil giants, but with little success.

　　Biden's trip to the Middle East this week is widely believed to be "obvious".

　　Ding Long, a professor at the Institute of Middle East Studies at Shanghai International Studies University, pointed out that the primary goal of Biden's trip is to ask Saudi Arabia and other oil-producing countries to increase production.

On the one hand, it is to reduce the negative impact of sanctions against Russia; on the other hand, due to soaring oil prices and runaway inflation, the US economy and people's livelihood are facing unprecedented difficulties.

In a few months, the United States will usher in the mid-term elections. In order to save the sluggish election and popularity, Biden has to "cramp on".

　　It is understood that at the end of Biden's trip to Saudi Arabia, the oil production increase has not been clearly finalized.

But Biden said, "We have reached some important agreements with Saudi Arabia" "We discussed Saudi Arabia's defense needs."

He told the media that Saudi Arabia is expected to further increase oil supply to help control the cost of fuel in the United States.

　　Can this trip cool down oil prices?

Not easy.

　　In fact, there is currently limited room for Saudi Arabia and the United Arab Emirates to increase crude oil production.

Saudi Crown Prince Mohammed bin Salman said that Saudi Arabia "has the ability" to increase domestic crude oil production capacity to 13 million barrels per day, but there is no additional capacity to continue to increase crude oil production for the time being.

Previously, the United Arab Emirates also revealed that its own oil production is close to the limit and cannot increase production significantly.

　　Considering the above situation, expert analysis believes that Biden's trip to the Middle East has a limited effect on alleviating the tight global crude oil supply, and is more of an emotional impact.

　　The current tight supply situation persists, said Damien Courvalin, head of Goldman Sachs energy research.

Even if Biden persuades OPEC to increase supply, the situation will only be temporarily relieved and will not solve the problem of underinvestment in the entire energy market.

(Finish)