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

How India Can Cope With Cut In Iran Oil Imports

How India Can Cope With Cut In Iran Oil Imports

US President Donald Trump said on Saturday that Saudi King Salman has agreed to ramp up oil production in order to help offset the crude being pumped by Iran and Venezuela.

The move would compensate for "turmoil [and] disfunction" in Venezuela and Iran, both members of the Organization of Petroleum Exporting Countries, Trump said in a tweet Saturday morning.

However, the United States' latest demand for an oil import embargo has not won understanding and support from the countries concerned.

As Guyana inches towards a 2020 commencement of the exploitation of what has been determined to be a potentially fortune-changing oil find, some of the major players in the industry were discussing what is widely believed to be significant global movement towards a historic shift in the demand for oil and oil products driven by growth in the world's major markets.

Oil prices rose on Friday on concern that US sanctions against Iran would remove a substantial volume of crude oil from world markets at a time of rising global demand.

Saudi authorities acknowledged that the two leaders had a conversation but had no immediate comment on its substance.

"Our focus is to work with those countries importing Iranian crude oil to get as many of them as possible down to zero by November 4", a State Department official told Reuters, adding, "We are prepared to work with countries that are reducing their imports on a case by case basis".

"We're going to isolate streams of Iranian funding and looking to highlight the totality of Iran's malign behaviour across the region", says the official. "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.

Trump deemed the deal "defective" because it was aimed at lifting some sanctions from Tehran in exchange for curbing Tehran's nuclear capabilities by the involved parties.

Iran's Supreme Leader Ayatollah Ali Khamenei on Saturday accused Washington of trying to turn Iranians against their government.

The unprecedented supply-cut pact has lifted crude prices from below $30 a barrel in early 2016 to around $70.

Last week, OPEC led by Saudi Arabia and its allies including Russian Federation agreed to boost oil supplies after curbing output since 2017 to address a global supply glut.

But a trade dispute between the United States and China is expected to slow the flow of crude oil from the Asia, one of the sources said.

Opec agreed with Russian Federation and other oil-producing allies on June 23 to raise output from July, with Saudi Arabia pledging a "measurable" supply boost, but giving no specific numbers.

On the other hand, Saudi Arabia and Russian Federation have spare production capacity and could presumably ramp up their production to help address the new OPEC policy. "This strategy hinges on Saudi Arabia", Helima Croft, an analyst at RBC Capital Markets, said in an interview Friday. "This was managed between the two to rob the pocket of rest of the world", he said.

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