UK, Japan Urge Mideast Producers to Raise Output

The UK and Japan have urged key Middle East producers Saudi Arabia and the United Arab Emirates to increase oil supplies, reflecting their concerns about high energy prices as Russia wages war in Ukraine.

UK Prime Minister Boris Johnson flew to Riyadh and Abu Dhabi on Wednesday and held separate talks with Prince Mohammed bin Salman and Sheikh Mohammed bin Zayed, respectively the crown princes and de facto rulers of Saudi Arabia and the UAE.

The two Arab countries hold the lion's share of spare oil production capacity within the Opec-plus alliance.

Earlier in the day Japanese Prime Minister Fumio Kishida said via Twitter that he had called on the UAE to "make further proactive contributions" to stabilize the global oil market, in a phone call with Sheikh Mohammed.

Crude oil prices have retreated from their recent highs of more than $120 per barrel, but at around $100 they remain well above most consumer nations' comfort zones.

Meanwhile, the Financial Times reported that the European Federation of Energy Traders has asked governments and central banks to provide temporary "emergency liquidity support" to ensure wholesale gas and power markets can function.

Johnson Takes Aim at Putin

Johnson spoke with the Emirati leader about boosting cooperation on energy security, as well as defense and trade, the prime minister’s office said. He was also expected to urge Saudi Arabia, the world's largest exporter of crude oil, to raise production.

"When we look at the dependency that the West, in particular, has built up on Putin's hydrocarbons, on Putin's oil and gas, we can see what a mistake that was," Johnson said before flying to the kingdom.

"He's been able to blackmail the West, to hold Western economies to ransom. We need independence," he added.

The Saudi oil minister also attended the talks with Johnson in Riyadh, and a memorandum of understanding was signed by the two countries about forming a strategic partnership, according to the Saudi Press Agency (SPA).

However, the SPA report made no mention of any discussion or agreement about raising Saudi crude production and Johnson deflected a question on that point afterwards. "I think you'd need to talk to the Saudis about that," he said.

Import-Dependent Japan

Japan is a major importer of crude oil, and gets most of it from Mideast Gulf producers, including Saudi Arabia and the UAE.

It also imported 89,000 barrels per day of crude oil from Russia last year, making that country its fifth-largest source of imports.

Although Tokyo is working with its Western allies as they step up sanctions against Moscow over its invasion of Ukraine, like the EU it has not announced a ban on energy imports from Russia.

Russian oil imports into the UK averaged 165,000 b/d in 2020 and currently account for about 8% of the country’s total oil demand.

The government announced last week that the UK will phase out imports from Russia by the end of this year.

The UK also imported 45,000 b/d of oil from Saudi Arabia and 20,000 b/d from the UAE in 2020. But it is far less exposed to supply disruptions than import-dependent Japan because the UK's own crude output averaged 840,000 b/d last year.

Opec-Plus Resists Pressure

So far the Opec-plus alliance has resisted diplomatic pressure to step up its oil production beyond the regular monthly increases of 400,000 b/d that it has been targeting since last summer.

Saudi Arabia and non-Opec Russia are the two biggest Opec-plus producers by a wide margin.

Riyadh is keen for Russia to remain a member of the Opec-plus alliance, which could make it reluctant to raise production beyond previously agreed amounts for fear of alienating Russia, which has been hit hard by Western sanctions.

Opec-plus ministers are scheduled to meet on Mar. 31 to discuss market management policy for the month of April.