Saudi Arabia says ready to boost oil production, taking aim at Iran

Alicia Cross
July 5, 2018

Referring to reports that Saudi Arabia may increase its oil exports to replace Iranian oil in world markets, Jahangiri said: "Anyone trying to take away Iran's oil market (share) would be committing great treachery against Iran and will one day pay for it".

USA crude stockpiles are forecast to have declined 5 million barrels last week, according to a Bloomberg survey ahead of government data to be released on Thursday.

"The Trump administration's plan for Iran sanctions is now abundantly clear".

If Mr Trump's tweets are taken as policy, it means the U.S. is assuming a 2 million barrel-a-day increase is readily available from the Saudis, a relationship that has already been leveraged "to the maximum extent".

But a flurry of USA announcements over the weekend unsettled oil markets.

Looming U.S. sanctions on Iranian crude exports, force majeure in Libya and unplanned pipeline outages in Nigeria have been clouding the supply outlook despite rising output by the Organisation of the Petroleum Exporting Countries.

The firm acknowledges that Saudi Arabia is now raising production and expects Russian Federation, the United Arab Emirates and Kuwait to pump more oil, but says it will not be enough to balance the market.

Abu Dhabi National Oil Company (Adnoc) on Tuesday said it has the capacity to increase production by several hundred thousand barrels per day, if required to meet any potential supply shortage. While the comments were ambiguous, Iranian officials in the past have threatened to block the Strait of Hormuz, a major oil shipping route, in retaliation for any hostile USA action.

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Some argue that Saudi Arabia, Russia and the UAE, along with surging USA exports will cover the shortage.

Monica Malik, chief economist, Abu Dhabi Commercial Bank, welcomed the UAE's decision to hike output later this year as it will bring stability in the oil market and also improve government revenues from hydrocarbon sector.

In a tweet on Saturday, Trump said the extra Saudi oil would help offset a decline in supply from Iran, after the United States pulled out of the Iran nuclear deal in May and moved to reimpose oil sanctions.

The early gains came after Iran appeared to threaten to disrupt oil shipments from the Middle East Gulf if Washington pressed ahead with sanctions.

Craig added that more issues could develop as Washington tightens the sanctions noose on Iran and Venezuela.

Venezuelan production fell to 1.36 million bpd by June, compared to just under 2.5 million bpd at the start of previous year, amid a structural underinvestment in the country.

She warned that the handling of any economic or oil crisis will "require diplomacy, delicate partnerships and technical knowledge". "We are also working with oil market participants, including producers and consumers, to ensure market stability". That's what we're doing.

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