Iran says removing oil from market by November impossible

Crude Oil

President Donald Trump says in a tweet that King Salman of Saudi Arabia has assured him that his country will boost oil production, perhaps as much as 2 million barrels, in response to turmoil in Iran and Venezuela.

However, the recovery in momentum was gradual as the reduction in supplies due to OPEC led voluntary cut and unplanned supply disruption from Canada, Libya and Venezuela were virtually balanced by high United States shale output.

OPEC last week announced a 1 million bpd oil production increase to ease prices that have shot above $70 a barrel, threatening global economic growth, though Washington has warned that the announced increase may not be enough.

Trump is also pushing oil producing countries to cut crude imports from Iran. "This strategy hinges on Saudi Arabia", Helima Croft, an analyst at RBC Capital Markets, said in an interview Friday. Brent crude stood at $79.42 a barrel, while US benchmark crude was at $74.15. But he said it's unlikely that decrease could sustain itself as demand spikes, leading prices to rise by wintertime.

Trump's claim on Saturday comes after the Organization of the Petroleum Exporting Countries (OPEC), a grouping of oil producing states that includes Saudi Arabia, already agreed to ramp up production by a million barrels a day at a meeting earlier this month. Moreover, increased production by GCC countries will also reduce any market fears of further supply shortages especially as Iranian sanctions take hold in November. With the GOP elections inching closer, it is no wonder that Trump will try to reassure Americans that he has cut them a deal to lower prices. There may be no country in the world that we have a problem getting oil from.

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". That would be roughly 1 million barrels per day of crude oil output increase according to OPEC officials.

"Once you get above that level, we are into uncharted territory", said David Fyfe, chief economist at the Gunvor Group, a major trading house.

Aside from the Saudis, only a handful of producers, including Kuwait, the United Arab Emirates and Iraq, are likely to be able to put more oil on the market soon. The kingdom pumped slightly more than 10 million barrels a day in May. Moreover, higher output is needed during summer months anyway because the country burns oil for electricity, which spikes amid hot summer temperatures. That's up about 55 cents from the same period a year ago, at a time Trump's Republican Party is trying to hold on to its majorities in Congress in the November midterm elections. The two leaders stressed the importance of maintaining oil-market stability, according to the report. China remains the largest importer of Iranian oil with 24 percent, followed by India with 18 percent.

More specifically, the allies being referred to in the deal include China and India.

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