Saudi Arabia pledged to expand oil capacity if needed -White House

Eileen GuzmanJul 02, 2018

Trump's comments come as oil prices have edged higher as his administration pushes USA allies to end oil purchases from Iran.

Output is expected to rise to 11 million barrels in July, according to Reuters.

Brent price on Friday rose $1.54 a barrel to $79.39 on concerns that USA sanctions against Iran would remove a substantial volume of crude from world markets at a time of rising global demand.

This comes barely days after the United States has asked countries to cut all oil imports from Iran by the start of November or else face powerful U.S. sanctions.

U.S. President Donald Trump said in a tweet on Saturday that Saudi Arabia's King Salman had agreed to his request to increase oil production "maybe up to 2,000,000 barrels" to offset production from Iran and Venezuela.

The Saudi government said on its official website that the two leaders had spoken about oil production, but avoided suggesting any specific deal had been struck. The 13% surge in prices has been driven by a series of factors in the global oil market that will trickle down to U.S. drivers filling up their gas tanks.

Though the OPEC didn't disclose country quotas in the recent announcement of 1bpd output hike, Bell sees there are a few countries with available capacity to raise production and any increase in production would be borne most significantly by Saudi Arabia, the UAE and Kuwait.

Oil prices have edged higher as the Trump administration has pushed allies to end all purchases of oil from Iran following the USA pulling out of the nuclear deal between Tehran and world powers.

Iranian exports have been running around 2.4 million barrels a day, according to the International Energy Agency.

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.

A gallon of regular gasoline sold on average in the US for $2.85, up from $2.23 a gallon past year, according to AAA.

FGE, an energy consultancy, said in its June newsletter that the United States is determined to "push Iran's exports to zero". The kingdom pumped slightly more than 10 million barrels a day in May.

Trump told King Salman bin Abdulaziz Al Saud that the oil market could use a boost in production when the two men spoke on Friday, the White House said.

"Saudi Arabia can use some of its stocks to boost exports, visible to the United States president, while it takes time to ramp up operating capacity", said Olivier Jakob, head of Swiss-based consultant Petromatrix GmbH.

Besides the looming USA sanctions against Iran, which is fueling the rally in Brent futures, and the outage in Canada, which is supporting WTI crude, both markets are also benefitting from supply issues in Venezuela and Libya.

"This will push the system close to the limit", and spare production capacity could fall below 2 million barrels a day - a level previously associated with $100 per barrel prices, the group said.

"I guess the Saudis want to give the confidence to Trump to go very hardcore on Iran", tweeted the oil market's most vocal bull, commodities hedge-fund manager Pierre Andurand.

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