The White House has dismissed a suggestion that President Trump made in a tweet that Saudi Arabia is ready and willing to increase oil production by up to 2 million bpd to compensate for declines in Venezuela and Iran.
“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,” a White House statement issued on Saturday read.
Earlier in the day, Trump tweeted:
The U.S. President has been very active in urging OPEC to start pumping more oil in a bid to tackle rising prices at the pump at home ahead of mid-term elections. He began by berating the cartel and Russia for keeping prices artificially high by quashing production, but later he changed the tone and began urging them to co-operate.
Saudi Arabia has been equally quick in assuring its overseas partner it will be happy to oblige. Reuters data has suggested the Kingdom has increased its production by 700,000 bpd since May and is now pumping nearly 10.72 million bpd—the record-high production level recorded in November 2016, before the cuts kicked in. Related: The Biggest Risk For Natural Gas Markets
Yet analysts are not as sure as the Saudis that the country has so much spare capacity. In fact, many doubt Saudi Arabia could increase its production by more than 1 million bpd. One of them, Amrita Sen from Energy Aspects, noted that even if the Saudis do have the stated spare capacity, bringing it on line would take quite a bit of money and time—no less than a year.
Saxo Bank’s Ole Hansen, on the other hand, said the Saudis could tap their inventories to increase oil exports because of their inability to up production to 12 million bpd. However, this would “also increase Middle East tensions and with Iran controlling the Strait of Hormuz there is a risk that this could escalate to a point where 2 million bpd would not be enough.”
By Irina Slav for Oilprice.com
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