The trip, announced in June after months of deliberations, will be Mr Biden’s first visit to Saudi Arabia since he became president last year.
He will meet Saudi King Salman, Crown Prince Mohammed bin Salman and other Gulf leaders during his tour from July 13 to July 16. He will also attend a GCC summit including Egypt, Iraq and Jordan, known as the GCC+3.
The focus of the tour is on relations with Israel and its greater integration in the broader region, and on June 30, Mr Biden stressed that the trip was not about mounting pressure on Saudi Arabia to boost oil production.
However, the tone is changing as the trip nears and frantic behind-the-scenes diplomacy will certainly be afoot in an attempt to sway Gulf producers as much as possible to boost crude production and ease supply constraints.
White House national security adviser Jake Sullivan on Monday said President Biden will make the case for increasing oil output as "we do believe there is a capacity for further steps that could be taken".
Crude price volatility has shackled energy markets since the beginning of Russia’s military offensive in Ukraine, which has also triggered turmoil in global financial markets and commodity prices.
Mr Biden and his European allies have repeatedly urged Opec+ oil producers to increase output in a bid to rein in high oil prices that are feeding into rising inflation.
Co-ordinated releases from the Strategic Petroleum Reserves by the US and its allies around the world earlier this year did little to cool the market.
However, Opec+ has so far not heeded the calls despite rising concerns of a global recession that could dent demand for oil.
However, Gulf oil producers have precious little in spare capacity and “they’re going to be judicious on how they deploy any remaining spare barrels”, Helima Croft, chief strategist at RBC Capital told Bloomberg. “I don’t think they want to exhaust all of their spare capacity as part of a strategic reset with the US.”
The National looks at what Opec+ is, what has compelled it to ignore western pleas, what the supply and demand dynamics are and where oil prices can go from here.
What is the Opec+ stance on crude production caps?
The alliance remains in place until the end of this year and has successfully navigated markets through one of the most turbulent times for the group. It has stuck to its stated policy to bring additional oil supplies, according to market fundamentals.
Since the beginning of Russia's military offensive against Ukraine in February, the Opec+ alliance has maintained that volatility in oil markets was not being caused by fundamentals, and that higher oil prices were the result of geopolitical developments.
Why the urgency to contain prices?
The risk of global recession is mounting amid surging inflation. Food, energy and commodity prices have risen significantly and businesses around the world are facing a sharp increase in raw material prices, as transport costs increase.
Higher oil prices are feeding into consumer prices, further depleting the already dwindling purchasing power of consumers.
With US petrol prices rising at the pump, inflation at a 40-year high and subsequent interest rate increases making borrowing more expensive, Mr Biden’s approval ratings have declined sharply at home as he prepares for his Middle East visit.
He has already urged US refineries to increase production and reduce petrol prices, and has also asked politicians to approve a proposed “gas tax holiday” to ease the cost-of-living pressure on Americans.
"We will convey our general view [during the trip] … that we believe that there needs to be adequate supply in the global market to protect the global economy and to protect the American consumer at the pump," Mr Sullivan said.
However, markets in the meantime, remain "torn between recession fears in the US, Europe and China torpedoing growth and thus, oil consumption, and the still very tight supply/demand reality of the physical market", Jeffrey Halley, senior market analyst, Asia Pacific at Oanda, said.
"Little hope is being assigned to Biden’s visit to Saudi Arabia unlocking more production."
What has driven the price instability?
Even before Russia’s war in Ukraine, prices were on the rise. Brent, the benchmark for two thirds of the world's oil, rose 67 per cent on the back of last year's faster-than-expected global economic rebound.
It carried the positive momentum into 2022 but since the conflict in Ukraine, which has disrupted global energy flows, price volatility has significantly increased.
Brent rose to a notch below $140 a barrel in March before giving up some gains. It is still about 40 per cent higher this year, trading near $100 a barrel despite mounting recession fears that have affected demand.
What are the demand and supply shortfall dynamics?
In June, Opec maintained its forecast that world oil demand would exceed pre-pandemic levels in 2022, but said Russia’s military offensive, developments related to the pandemic and inflationary pressures posed a “considerable risk”.
The group maintained its oil demand forecast for this year at 3.36 million bpd, unchanged from the previous month's forecast.
Global oil consumption in 2022 is projected to average 100.29 million bpd, with demand exceeding 2019 levels by 0.09 million bpd, according to Opec estimates.
However, the latest data shows that Opec+ is already running 2.6 million bpd short of its production target as many members have reduced production capacity.
“There’s no magic wand for any president in this situation,” Bob McNally, president of Washington-based consultant Rapidan Energy Group and a former White House official, said. “The best you can do is ask Opec, and they don’t have much to give.”
Global oil supply will also “struggle” to keep pace with surging demand next year, according to a June 15 report by the International Energy Agency.
Output from Opec+ is expected to surge by 2.6 million bpd this year but there is a chance it could contract by 520,000 bpd next year.
Russian output is expected to drop by about 3 million bpd to 8.7 million bpd by the start of 2023, according to the IEA report.
What other factors are at play?
The group is unlikely to pump as much as it intends to as many members of the Opec+ alliance have been struggling with capacity constraints for years due to underinvestment.
The total investment in the upstream sector of the oil and gas sector fell 23 per cent below pre-coronavirus levels to $341 billion in 2021, according to a report by the International Energy Forum and IHS Markit.
The global oil and gas industry requires more than $600bn of investment annually until 2030 to keep pace with rising demand, Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc, said last year.
Suhail Al Mazrouei, UAE Minister of Energy and Infrastructure, also said a lack of investment could extend the cycle of higher oil prices.
What is the spare production capacity of Opec+ members?
Saudi Arabia and the UAE have a combined spare oil capacity of more than 2 million bpd, according to the IEA. However, both are already close to the level where they can produce at a sustained pace.
Saudi Aramco in March 2020 said it can reach and sustain maximum production of 12 million bpd but the kingdom has only held this level for a single month in April 2020.
"Persuading Saudi Arabia and the UAE to utilise spare oil capacity, which they may not be motivated to do so, given that maximising oil prices is in their interest," Hasnain Malik, strategy and head of equity research at Tellimer Research, said.
What is the future oil price trajectory?
A contraction in the global economy or a massive flare-up in the pandemic that requires new lockdowns at a significant level globally can dent oil demand and bring prices down.
The lifting of Iranian sanctions could bring an additional 1.3 million bpd of crude to the market that could also ease prices.
However, in the short to medium term, prices have an upside bias amid continued structural supply issues.
Last month, Mr Al Mazrouei said oil prices could go higher as Chinese demand was expected to recover significantly at a time when efforts by Opec+ to raise production were not yielding results fast enough.
The G7 is working on plans to cap the price fetched by Russian oil to cut the flow of funds to Moscow.
However, Russia can afford to reduce daily crude production by 5 million bpd without excessively damaging its economy.
A 3 million bpd cut to daily supplies would push benchmark London crude prices to $190 while the worst-case scenario of 5 million bpd could mean prices in the range of $380, JP Morgan analysts wrote.