Trump urges Saudis to raise oil output 'by two million barrels'

Ann Santiago
July 2, 2018

Benchmark Brent crude LCOc1 was trading around $79 a barrel on Friday, and a Reuters poll showed prices look to remain strong for the rest of this year due to supply disruptions in countries including Libya and Venezuela and as the extra oil from OPEC fails to meet rising demand.

The average per-gallon price for gasoline in the United States was $2.85, a jump of 63 cents from a year ago, according to AAA.

Non-Opec member Russian Federation on June 23 also backed the effort, capping a week of tense diplomacy for the grouping that averted a damaging rift between arch foes Iran and Saudi Arabia. Prices to (sic) high!

"During the call, the two leaders stressed the need to make efforts to maintain the stability of oil markets and the growth of the global economy", the statement said.

The statement did not confirm that Saudi Arabia had agreed to the two million barrels a day figure.

Saudi Arabia - along with other Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations, including Russian Federation - had agreed on June 22 to boost production by a combined 700,000 to 1 million barrels a day, a move that should help contain the recent rise in global energy prices.

"In this case, Saudi Arabia's output [with two million bpd spare capacity] needs to increase by at least 400,000 bpd in the second half of 2018 to offset the supply shortfall and lead to a marginal increase in global inventory levels".

Saudi King Salman bin Abdulaziz and Trump, in a phone call Saturday, discussed efforts by the oil-producing countries to compensate potential shortages in oil supply, the state-run Saudi Press Agency reported. Trump's claim of a 2-million-barrel increase for Saudi Arabia alone does not specify a timeframe.

There was no immediate comment from Saudi authorities.

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

In the end, Saudi Arabia and Russian Federation pushed through a rise of about 1 million bpd at the Vienna meeting.

On Saturday, Iranian Supreme Leader Ayatollah Ali Khamenei said the U.S. was trying to drive a wedge between Iranians and their government using "economic pressure".

Trump appears to be trying to "talk the market down", said Lawrence Goldstein, who directs the Energy Policy Research Foundation.

"Any increase in the production by any member country beyond commitments stipulated in OPEC's decisions. would constitute breach of the agreement", Zanganeh wrote in the letter seen by Reuters and reported by Iranian state media.

Oil prices have edged higher as the Trump administration pushes US allies to end oil purchases from Iran. At meetings in Vienna on 22-23 June, OPEC and its allies cobbled together a delicate accord in order to satisfy some producers, like Iran and Venezuela, which wanted to limit output, and others like the Saudis, which sought to ease away from the supply cuts. Since the lifting of sanctions in 2016, Iran has returned as a major oil supplier, selling around 2.5 million barrels a day, or more than 2 percent of global supplies.

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