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7 Oct, 2023 13:20

Saudi Arabia considering oil U-turn to secure defense deal – WSJ

Washington has been pressuring Riyadh to scrap its voluntary crude output cuts to lower prices for months
Saudi Arabia considering oil U-turn to secure defense deal – WSJ

Major oil producer Saudi Arabia is willing to increase production early next year in exchange for a defense pact with the US, the Wall Street Journal reported on Friday, citing Saudi and US sources.

The two countries have been in talks over a three-way deal between Saudi Arabia, the US, and its Middle Eastern ally Israel. Under the deal, Riyadh would recognize the Jewish state in exchange for a formal security pact between Riyadh and Washington. This would see the US provide help in establishing a civilian nuclear program in Saudi Arabia, and agree to sell billions of dollars worth of American weapons to the Gulf nation.

According to the report, talks over the deal have been stalling due to Washington’s concerns over soaring oil prices. The OPEC+ group of major oil producers, which comprises the Organization of the Petroleum Exporting Countries (OPEC) led by Saudi Arabia and allies including Russia, agreed last October to implement oil output cuts until the end of 2023. The action has since kept global crude prices elevated and caused a rise in gasoline prices in the US.

The administration of US President Joe Biden has been pressuring Saudi Arabia, as the globe’s largest oil exporter, to scrap the cuts and increase supply, but so far to no avail. Earlier this week, Saudi Arabia reiterated its decision to adhere to output cuts until the end of the year. While the policy is due to expire by January, things may change as OPEC+ is set to meet at the end of November to decide further production levels.

Washington reportedly expects to finalize its deal with Saudi Arabia and Israel in the next six months, as the three sides are said to have largely agreed on its basic provisions. However, US officials have reportedly notified Riyadh that Congress may not support concessions to Saudi Arabia unless it agrees to bring more oil to the market.

According to Saudi sources, Riyadh negotiators said that, while they are willing to consider boosting supply, they will base any production decisions on market conditions.

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