Saudi Arabia is reportedly willing to increase its crude oil production early next year in exchange for a defense pact with the United States, according to sources cited by the Wall Street Journal on Friday. The discussions between the two countries have centered around a potential three-way deal involving Saudi Arabia, the US, and Israel. Under this deal, Saudi Arabia would officially recognize Israel in exchange for a formal security agreement with the US. In addition, the US would provide assistance in establishing a civilian nuclear program in Saudi Arabia and sell billions of dollars worth of American weapons to the Gulf nation.
However, negotiations on the deal have been hindered by US concerns over rising oil prices. The OPEC+ group, which includes Saudi Arabia and Russia, among others, agreed last October to implement crude oil output cuts until the end of 2023. These cuts have kept global crude prices high and caused gasoline prices to increase in the US.
The Biden administration has been pressuring Saudi Arabia, as the world’s largest oil exporter, to abandon the production cuts and increase supply. Nevertheless, Saudi Arabia recently reaffirmed its commitment to adhere to the output cuts until the end of the year. The situation might change, however, as OPEC+ is scheduled to meet at the end of November to decide on production levels for the future.
The report suggests that the US expects to finalize the deal with Saudi Arabia and Israel within the next six months, as the parties have largely agreed on its main provisions. However, US officials have reportedly cautioned Riyadh that Congress may not support concessions to Saudi Arabia unless it agrees to increase oil production.
Saudi sources have indicated that while they are willing to consider boosting supply, any decisions on production will be based on market conditions.
The potential defense pact and increased oil production from Saudi Arabia could have significant implications for the global oil market. If Saudi Arabia increases its production, it may help ease oil prices and address concerns about supply shortages. However, it remains to be seen how the deal between Saudi Arabia, the US, and Israel will progress and whether it will ultimately lead to a significant change in oil production levels.
The outcome of the upcoming OPEC+ meeting at the end of November will also be closely watched by market participants, as it will determine the group’s stance on future production levels. Any decisions made in this meeting could further impact global oil prices and supply dynamics.
Overall, the negotiations between Saudi Arabia, the US, and Israel highlight the complex interplay between politics and the oil market. As countries seek to balance their economic and strategic interests, the outcome of these discussions will have wide-ranging consequences for the energy sector and geopolitical relationships in the Middle East.