Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
The man that has the power to change Saudi Oil policy is Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud, which is someone that the Biden administration refuses to talk to because of his alleged ordered killing of Saudi Journalist and U.S. citizen Jamal Khashoggi. So I doubt that this call will have any impact on the Saudis relenting on their voluntary 1 million barrel a day production cut.
Oil prices freaked out after the OPEC Plus panel ended without a policy decision. Yet the lack of a decision does not mean that OPEC Plus is not going to agree to roll over cuts because they will. OPEC lowered its demand expectations so any pullback from a rollover of cuts would hurt prices and it is unlikely they will allow that to happen. Lockdown announcements in Europe give the cartel the justification that it needs. The Saudis are pressuring members on compliance and the meeting ended asking for compensation cut plans from cheating OPEC members that will be submitted today. The only question I think will be whether they roll over the cuts for one month or two.
Energy Secretary Jennifer Granholm who has a disdain for fossil fuels and the fossil fuel industry, also tweeted about her conversation with the Saudi Oil Minister, “We also discussed closer collaboration to solve common challenges and develop renewable energy sources, increase efficiency, reduce methane in oil and gas production, and develop clean forms of hydrogen to combat climate change.” The Saudis are moving big into the hydrogen space.
The Biden infrastructure plan also will eliminate tax preferences for fossil fuel companies which also will not bring us affordable and reliable sources of energy for consumers. The truth is that if we are going to build roads and bridges we will need a lot of petroleum products. More of a tax burden on U.S. fossil fuel companies will make build back better with build back with foreign oil.
Bloomberg reports that, “Canada’s oil-sands industry was among the hardest hit sections of the industry when Covid-19 and a worldwide glut of crude crashed prices last year. Now, assuming some or all of Biden’s wish list is granted, heavy crude from Western Canada may be poised for a rebound. “The asphalt industry should be elated with Biden’s plan to upgrade 20,000 miles of roads in the U.S.,” said Charles Kemp, a senior consultant at Baker & O’Brien Inc. “However, this announcement favors heavier oil production from outside of the U.S., which contains roughly double the amount of asphalt versus the asphalt content in light crudes from U.S. domestic production.”
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