Saudi ready to boost oil production, says Trump

01 July, 2018, 12:56 | Author: Brooke Harris

Trump said he asked the Saudi king to crank up production by as much as 2 million barrels a day, which would bring Saudi Arabia's production close to its maximum capacity.

The current production curb pact calls for participating countries to trim output by 1.8 million barrels a day.

But oil officials cited by The Wall Street Journal said it is debatable whether the kingdom would be able to raise output by the amount Trump suggested. Expectations that this production increase won't be enough to stabilize these inventory levels are the primary driver behind last week's oil price surge.

Price increases have also been driven by Trump's decision to withdraw from the Iran nuclear deal and reimpose trade sanctions there.

The telephone exchange is another sign of how US-Saudi ties have improved under Mr Trump compared with the Obama administration, which alienated the kingdom by seeking a nuclear deal with Iran.

Saudi Arabia along with other Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations, including Russian Federation, had agreed on June 22 to boost production by a combined 700,000 to 1 million barrels a day, so any 2 million bpd-increase would be at least double market expectations. The leader of OPEC said it plans to pump a record-high 11 million barrels of oil per day in July, according to reports.

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Iran had been pushing hard for oil producers to hold output steady as USA sanctions are expected to hit its exports.

Trump's claim on Saturday comes after the Organization of the Petroleum Exporting Countries (OPEC), a grouping of oil producing states that includes Saudi Arabia, already agreed to ramp up production by a million barrels a day at a meeting earlier this month. At meetings in Vienna on June 22-23, Opec and its allies cobbled together a delicate accord in order to satisfy some producers who wanted to limit output and others like the Saudis, which sought to ease away from the supply cuts. Oil prices also have risen with the ongoing unrest in Venezuela, as well as with fighting in Libya over control of that country's oil infrastructure. Saudi Energy Minister Khalid Al-Falih indicated the group's action would add almost 1 million bpd to the market. "While Saudi Arabia has the capacity in theory, it takes time and money to bring these barrels online, up to one year", said Amrita Sen of consultancy Energy Aspects.

US officials are pressing allies in Europe, Asia and the Middle East to adhere to the sanctions once they are re-imposed, with the aim of pressuring Iran into negotiating a new agreement. But oil experts were cautious about whether that would actually reduce worldwide prices or raise anxiety further.

"They bring to bear economic pressure to separate the nation from the system. but six USA presidents before him tried this and had to give up", Khamenei was quoted as saying on Saturday by his website Khamenei.ir, referring to Trump.

That's up about 55 cents from the same period a year ago, at a time Mr Trump's Republican Party is trying to hold on to its majorities in Congress in the November midterm elections.

However, investors are betting that Saudi regime "has little room to respond to a future crisis should it boost output even more to meet Trump's request, as Saudi Arabia only has about 2 million barrels of unused capacity", according to International Energy Agency.

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