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White House reportedly lobbied to prevent OPEC+ output cuts

Yahoo Finance’s Rick Newman joins the Live show to discuss reports that the White House tried to prevent OPEC+ output cuts amid global uncertainty and backlash to high gas prices.

Video Transcript

- Well, OPEC Plus's crucial meeting came amid various reports the Biden administration had been desperately trying to dissuade its allies in the Middle East from enacting these cuts. It comes amid concerns over an impact on domestic gas prices. Certainly something that's top of mind with the midterms just around the corner. Let's bring in Yahoo Finance's Rick Newman. Rick, a lot to parse through, especially given the EU headlines that came out too. That's obviously been negotiated in conjunction with the US to try and place this price cap on Russian oil. What's the next move for the White House?

RICK NEWMAN: Well, they monitor gasoline prices every minute of every day. So I think what they're watching is-- I think they really want to know, are gas prices, average prices, in the US going to get above $4? That seems to be the pivot point. They seem to be about as content as they can be as long as there's a three handle and most people see gas prices that start with a three. They don't want to see gas prices that start with a four. If they creep up there-- and they're getting close again. Gas prices are going back up around $3.84. What else can they do?

The administration has already, without really publicizing it, they have already extended the release of oil from the Strategic Reserve into November. It was supposed to end at the end of October. That now goes into November. They're releasing less in November than they did in prior months. But still, they're trying to do-- that's obviously an effort to try to get-- just put a little extra supply out there and say a bit of a backstop on prices.

I'm not sure there's much else they can do because they've tried jawboning the Saudis. They've tried jawboning US producers. They do have one thing going for them, which is US production actually is going up, as the Biden administration wants it to. It's going up slowly. But it is helping. So I think they're just going to be holding their breath until November 8.

- Yeah. The production certainly key when you consider how depleted SPR already is. There's the political backdrop to all of this, which is, of course, that trip the President made to Saudi Arabia over the summer. We saw in the aftermath of that OPEC Plus increasing production just slightly. But now you've got this what is considered more than expected 2 million barrels a day production cut. What does that mean in terms of the US relationship with the Saudis?

RICK NEWMAN: Well, it's obviously icier than it used to be. And let's not forget that this goes back to the murder of the journalist Jamal Khashoggi a few years ago in Turkey perpetrated by the Saudi regime. So Biden described the Saudi government and their leader Mohammed bin Salman as a pariah state when he was running for president. That obviously reflected deteriorating relations. And then he had to go over there, kind of taking it back and saying, could you please release a little more oil? They basically said, no.

So there's a lot-- this market is huge and very dynamic. And one of the things that has gotten the Saudis attention is increased production in the United States. The United States is still the world's largest producer of oil. It became the largest producer a couple of years ago. And it still is. But the government here doesn't control the oil sector. That's the big difference. So the government here can't say, pump more, pump less. That's up to the private sector and all the incentives there. So very dynamic market.

Whatever OPEC says it's going to do is not necessarily the way it's going to play out for the next year or a year and a half. And I was encouraged to hear Bob, the oil analyst, saying he thinks it's more likely oil prices are going to go lower rather than higher. But the Saudis are still there trying to keep a floor on oil. A lot of the tension in this market.

- Yeah. It's sort of that constant between trying to figure out what that global demand looks like. Obviously, what's happening in China playing into that as well. And then there's the political side of things with Russia-Ukraine war continuing. Rick, as always, thanks so much for that.