Published: Wed, July 04, 2018
Economy | By Melissa Porter

Donald Trump, Saudi king discuss oil markets, no mention of production plans

Donald Trump, Saudi king discuss oil markets, no mention of production plans

US President Donald Trump says Saudi Arabia has agreed to his request for an increase in its oil production.

Trump tweeted that after the two men had a phone conversation Friday King Salman had "agreed" to increase oil production, "maybe up to 2,000,000 barrels".

Japan and many other countries slashed their imports of Iranian crude oil, forcing Iran to sit at the negotiation table over its nuclear program and eventually leading to the nuclear deal three years ago.

Saudi Arabia regulates its oil production in agreement with other members of the Organization of Petroleum Exporting Countries.

Garbis Iradian, head of research for the Mena region at the Institute of International Finance, said near-term oil production growth from the USA and Canada may not be enough to offset supply shortfalls in Venezuela, likely losses from Iran, and the 1.4 million bpd growth in global demand for oil.

As Tehran seeks ways to counter USA sanctions that would restrict its exports and eat into its market share, Iranian Oil Minister Bijan Zanganeh wrote to his UAE counterpart, Suhail Al Mazrouei, who holds the Opec presidency in 2018, urging him to remind Opec members to adhere to last month's agreement.

It was unclear whether the Saudi king "agreed" to increase production or "agreed" prices were too high.

Saudi authorities acknowledged that the two leaders had a conversation but had no immediate comment on its substance. "When we decide on Iran we will inform you", he said.

Following the announcement, oil prices jumped, with analysts rushing to revise upwards their estimates of how many Iranian barrels will be lost to the world oil market from November onwards. It was only a few days ago that Saudi Arabia and its coalition partners said that they would add 1 mb/d of supply back onto the market, with many of them acknowledging that, in reality, the figures would be closer to 600,000 bpd because of the inability of so many producers to ratchet up output. This is one of Trump's plans to pressure the US' allies into cutting off funding to Iran.

That agreement sought to curb Tehran's nuclear capabilities in exchange for the lifting of some sanctions.

Meanwhile, Leader of Iran's Islamic Revolution Ayatollah Seyyed Ali Khamenei slammed all-out USA economic and political measures against Tehran in a Saturday address, describing them as futile efforts to turn Iranians against the Islamic Republic.

In this scenario, Saudi Arabia, the UAE, Kuwait and Iraq are the main countries that have the capacity to increase production, she said.

Against a backdrop of calls from the US, China, and India for more oil supply to stabilise the market, OPEC made a decision to raise output.

The fall of the national currency has provoked a public outcry over the quick rise of prices of imported consumer goods. Washington said last week it was asking customers in Asia and Europe to reduce Iranian oil purchases to zero from November, and that it will not grant any waivers to sanctions.

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