US President Donald Trump's administration backed off an assertion he made hours earlier indicating he persuaded Saudi Arabia to effectively boost oil production to its maximum capacity, which would have threatened to blow up a truce agreed by Opec last week.
U.S. President Donald Trump said Saturday that he had received assurances from King Salman of Saudi Arabia that the kingdom will increase oil production, "maybe up to 2,000,000 barrels" in response to turmoil in Iran and Venezuela.
The statement reported by Saudi media did not mention any intention by Saudi Arabia to raise production by 2 million bpd.
Concern of a potential lower supply and thus higher prices have been spurred by the economic crisis in Venezuela and US sanctions on Iran (the White House is pushing countries to stop imports of Iranian oil after it withdrew from the Obama-era nuclear deal with Tehran).
It added that there also was an understanding that oil-producing countries would need "to compensate for any potential shortage of supplies". It did not elaborate.
The Trump administration is pushing countries to cut all imports of Iranian oil from November when the United States reimposes sanctions against Teheran, after Trump withdrew from a 2015 nuclear deal agreed between Iran and six major powers, calling it a "defective" agreement.
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Benchmark Brent crude was trading around $79 a barrel on Friday, and a Reuters poll showed prices look to remain strong for the rest of this year due to supply disruptions in countries including Libya and Venezuela and as the extra oil from OPEC fails to meet rising demand.
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. That was after Saudi Energy Minister Khalid al-Falih said the kingdom would honour the OPEC decision to stick to a one-million-barrel increase. Prices to (sic) high!
Oil analysts and consultants nonetheless think the kingdom can produce more than 12 million bpd in an emergency through a so-called surge, in which oil fields are depleted beyond what engineers consider a reasonable rate. But oil experts were cautious about whether that would actually reduce worldwide prices or raise anxiety further. "There is no way one country could go 2 million barrels a day above their production allocation unless they are walking out of OPEC", he said.
"The Trump support base is probably the part of the US electorate that will be the most sensitive to an increase in USA gasoline prices", Halff said. He questioned whether Trump's words would do anything to reverse the effects on the market of declining Iranian oil production.
"If this happens, (it) means Trump is asking Saudi Arabia to walk (away) from OPEC", he told Reuters news agency. South Korea accounted for 14 percent of Iran's oil exports past year, according to the U.S. energy department.
China is the largest importer of Iranian oil with 24 per cent, followed by India with 18 per cent. Turkey stood at nine per cent and Italy at seven per cent.