Gulf region resists pressure to increase oil production: Are higher prices in Arab states' favour?

Calls to increase oil production to curb the rise in oil prices as a result of the Russian invasion of Ukraine have fallen on deaf ears among the leaders of the Gulf states, who are seeking to resist Western pressure.

 

The Gulf region wants to achieve large profits from the high prices that will avoid falling into a budget deficit in 2022, although they are aware of the risks in the long run. It also wants to convey a message to Washington that "this war is not our war", which is very similar to the message that the Americans have been sending them for several years about Yemen.

 

The Gulf states, which are rich in energy resources, continue to resist Western pressures and calls to work to limit the rise in oil prices resulting from the Russian invasion of Ukraine, in an effort to protect their strategic and economic interests, according to experts.

 

The price of US West Texas Intermediate crude reached $115 per barrel on Thursday, a record since 2008, driven by the war in Ukraine and doubts about the supply of Russian black gold, while the price of Brent crude approached $120. It should be noted that Russia is the second largest exporter of crude oil in the world after Saudi Arabia, which is close to Western countries and Moscow at the same time.

 

On Wednesday, the Organization of the Petroleum Exporting Countries and its allies in the OPEC + led by the Saudis and Russians rejected the call to increase production at a faster pace.

 

Strategic Independence Test

 

Hassan Al-Hassan, an expert on Middle East affairs at the International Institute for Strategic Studies, points out that "the Gulf states are testing their ability to enjoy strategic independence to defend their interests." The Gulf producing countries, which have suffered from the drop in oil prices since 2014, do not show an inclination to act immediately, because they benefit from higher prices in the short term," he said.

 

Karen Young, an expert in energy markets, pointed out on the website of the Washington-based Arab Gulf States Institute that if the price of a barrel remains above $100, none of the budgets of the six Gulf Cooperation Council countries will suffer a deficit in 2022.

 

Who Able to Compensate Russian production?

 

For her part, Deputy Head of the Energy Intelligence office, Amina Bakr, said that "there is no shortage of crude oil in the market, according to OPEC," adding that "the impact of Western sanctions on Russian oil and gas exports is still unknown."

 

Bakr assured that the only two countries in the OPEC+ that are able to increase pumping are Saudi Arabia and the UAE, but they are far from bridging the Russian export gap, explaining that the additional production can reach 2.5 million barrels per day "while Russian exports are close to 4 8 million barrels.

 

Quick Profits But...

 

Despite the quick profits, the oil-producing countries realize that high prices risk hitting the global economy and accelerating the “green” transition process in energy, especially as the rise comes in the midst of the campaign to recover from the consequences of the Covid-19 pandemic.

 

For Saudi Arabia, the most important thing is to be able to stabilize prices,” which depends on cooperation with Russia within the framework of OPEC +. Al-Hassan said, adding that the last time the Arabs and Russia confronted about production quotas, this led to a price war and then to collapse in prices.

 

As for Bakr, she considers that "keeping Russia within OPEC+ is necessary for member states. It is the only way to maintain the leadership of market management in the coming years."

 

 

Will Washington Increase Pressure?

 

 

The International Energy Agency announced Tuesday that its member states will release 60 million barrels of their emergency reserves in order to stabilize the market, half of which will come from the United States.

 

Al-Hassan believes that the pressure exerted by the U.S. on its close Gulf region partners has been "limited" so far, and we must "wait to see if it increases in the coming days."

 

The Gulf states are responding that "this war is not our war," a message very similar to the message the Americans have been sending them for several years about Yemen, Al-Hassan concluded