“In response to the President’s assessment of a deficit in the oil market, King Salman affirmed that the Kingdom maintains a two million barrel per day spare capacity, which it will prudently use if and when necessary to ensure market balance”, the statement said.
Oil prices have climbed sharply in recent months, with the price of a barrel hitting a multi-year high of around $78 on Wednesday.
Saudi Arabia and the U.A.E. are pledging to add barrels amid calls by U.S. President Donald Trump for more oil from the Organization of Petroleum Exporting Countries.
The White House later walked back the president’s comments, saying the king said his country can raise oil production if needed.
Trump was not specific on whether the additional 2 million barrels was a per-day figure – but worldwide daily demand is nearing 100 million bpd. “It looks as though any additional supply increase from Gulf producers and Russian Federation will not be able to replace lost barrels from Libya, Iran and Venezuela”. Republican presidents, especially George H.W. Bush and his son, used diplomatic channels with Saudi Arabia, the world’s biggest exporter which pumps nearly one-third of OPEC’s output.
Other analysts were more doubtful about immediate effects.
Libya’s National Oil Corporation (NOC) declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in total production losses of 850,000 bpd due to the closure of eastern fields and ports.
“Bulls are regaining control”, said Tamas Varga, an analyst at PVM Oil Associates in London.
The administration has threatened close allies such as South Korea with sanctions if they don’t cut off Iranian imports by early November.
Against this backdrop, the oil market could be sorely tested in the second half of the year and into 2019, unless demand slows, OPEC outages are less than expected, or non-OPEC producers such as the United States, Canada, and Brazil produce higher than forecast.
“Our focus is on getting as many countries importing Iranian crude down to zero as soon as possible”, Hook said.
Despite OPEC announcing that it would increase production at its June meeting, the financial speculators have been pushing prices of crude benchmarks higher around the world as the exact amount committed has remained vague. “We do not know how the market will react but prices will surely decrease”.
“Investors should keep in mind that U.S. shale production remains robust while global trade tensions present a threat for global growth, and this may translate to less demand for commodities”.
Supply disruptions have lifted prices to multi-year highs this year, and USA futures have rallied recently on supply outages in Libya and at a Canadian facility that weighed on available US crude supply.