Oil falls as Saudi output rises to compensate for disruptions

Ivan Schwartz
July 6, 2018

U.S. President Donald Trump said Saturday he was pressuring Saudi Arabia and OPEC to increase oil production.

The White House later walked back the president's comments, saying the king said his country can raise oil production if needed.

Trump said the agreement was reached after a phone call with the Saudi King about oil production but mentioned no specifics.

After the United States withdrew from the Iranian nuclear deal in May, it said it would reimpose economic sanctions against Tehran by November. "And who is their big enemy?"

Brian Hook, the senior official leading negotiations with USA allies on a new Iran strategy, said Washington is confident the world has enough spare oil capacity to replace Iranian crude.

Donald Trump (R) shakes hands with Saudi Arabia's Crown Prince Mohammed bin Salman.

Oil has been leaning to the bullish side this week after dipping from the weekend's headlines that Trump has encouraged Saudi Arabia to increase their production to make up for market shortfalls from Iran and Venezuela.

Trump announced earlier this year that he would pull the US out of the pact, which offered Tehran sanctions relief in exchange for curbing its nuclear program.

While the price of the global benchmark Brent crude has risen by 7.5 percent to $77.9 bpd since the mid-June bottom, the price of the North American benchmark WTI has risen by 16 percent and now at $73.8 per barrel.

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The issue is of concern as crude oil prices hit four-year highs.

The Organization of the Petroleum Exporting Countries 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. The initial public offering is the centerpiece of the kingdom's strategy to diversify its economy away from oil, and the government says it could generate $100 billion. "OPEC is and they better stop it because we're protecting those countries, many of those countries".

Last month, Opec, the cartel of oil-producing states, voted to increase production by up to a million barrels a day in a bid to keep spiralling oil prices steady.

Reuters cited industry sources as confirming UAE production was at 2.87 million bpd in July, meaning it has the potential to boost supplies by 400,000 bpd.

Trump will visit Europe this month for a meeting with North Atlantic Treaty Organisation allies, whom he has criticized sharply as paying too little for their joint defence. U.S.' West Texas Intermediate oil traded just under $75/bbl.

Washington has been pressing allies in Europe, Asia and the Middle East, including Saudi Arabia, to adhere to the sanctions, which are aimed at pressuring Iran to negotiate a new agreement to halt its nuclear programmes.

"OPEC is manipulating", Trump said Sunday in an interview on Fox News.

Kelty said: "I think it will trade in the $70 to $80 range but it will be very volatile".

Other reports by GizPress

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