U.S. missteps in Mideast weaken influence with OPEC

Saudi Arabia's Oil Minister Ali al-Naimi talks to journalists at the beginning of a meeting in OPEC's headquarters in Vienna March 5, 2008. U.S. missteps in the Middle East have estranged Washington from some long-time allies in the region and made OPEC suppliers less inclined to rescue the top consumer from record oil prices that are battering an already-fragile American economy.

WASHINGTON (Reuters) - U.S. missteps in the Middle East have estranged Washington from some long-time allies in the region and made OPEC suppliers less inclined to rescue the top consumer from record oil prices that are battering an already-fragile American economy.

Tempers flared this week at the White House after OPEC rejected U.S. calls to boost production, helping to send oil to yet another record above $100 a barrel. OPEC officials blamed high oil prices -- which topped $106 on Friday -- on the mismanagement of the U.S. economy.

The comments highlighted the strained relationship between the United States and long-time Gulf allies like Saudi Arabia, which has been tested by the U.S. military occupation of Iraq, confrontations over Iran's nuclear program and the grinding pace of U.S. efforts to forward Middle East peace talks.

"The White House's fundamental problem is they don't have credibility with the issues that are important to OPEC, so they're not inclined to give us a break on price," said David Goldwyn, an energy consultant.

"There's no motivation right now for them to help us out with more production," Goldwyn said.

The White House said Bush was "disappointed" by OPEC's decision not to increase production when it met in Vienna on Wednesday, after the U.S. president said the group was making a mistake to let high energy costs weaken the important oil consuming economy further.

"If OPEC has decided they are not going to increase output, there's not a lot that the President can do," White House spokeswoman Dana Perino said on Thursday. "We don't control their decisions."

Some U.S. drivers already pinched by the mortgage crisis could face gasoline prices above $4 a gallon this summer, surpassing the record average of $3.22 a gallon set last May, according to analysts.

High energy costs have spurred the Bush administration to call for the United States to curb its dependence on oil, raising flags among producers concerned about the possible erosion of oil demand to alternate fuels like ethanol.

SAUDI TIES

Though Bush made waves in Saudi Arabia in January when he publicly called on OPEC to boost production, he has so far been unwilling to call on the cartel's de-facto leader by name.

Despite public perceptions of a cozy relationship between Bush and the Saudi royal family, amity has declined since the presidency of George H.W. Bush -- who had a close relationship with the family, experts say.

Though former Saudi ambassador Prince Bandar bin Sultan enjoyed easy access to the Oval Office, "this issue of special relationships between families is not realistic," said Chas Freeman, president of the Middle East Policy Council.

Saudi Arabia is the only OPEC nation that is investing substantially to expand spare capacity, Goldwyn said. The kingdom plans to raise capacity to 12 million barrels per day by the end of 2009, versus about 10.5 million bpd currently.

"The Saudis are giving the administration basically everything they asked for already. It's the rest of the Gulf Arab states that are not investing," Goldwyn said.

"OPEC has under-invested, the cupboard is pretty bare."

Analysts said that while Saudi Arabia may be producing above quota to ensure markets have enough oil, other OPEC nations which are openly hostile to the United States such as Iran and Venezuela may have little sympathy for U.S. economic problems.

"I would say that Saudi Arabia is producing above its quota, but there is a lot of discord in OPEC as well, and I think that (Venezuelan President Hugo) Chavez is a loud voice," said James Crandell, energy research analyst for Lehman Brothers.

(Editing by Russell Blinch, Matthew Lewis and Matthew Robinson)