Saudi Arabia plans to stay within the limits of its ceiling under the OPEC+ production cut deal in May and will certainly not rush to ramp up production, although it would respond to customer needs if they want more oil, Saudi Energy Minister Khalid al-Falih said on Wednesday.
As the U.S. announced on Monday that it would be ending sanction waivers for all Iranian oil customers, the Trump Administration said that it "had extensive and productive discussions with Saudi Arabia, the United Arab Emirates, and other major producers to ease this transition and ensure sufficient supply."
While the U.S. and President Trump appear certain that Saudi Arabia would compensate for Iranian losses, the Kingdom seems reluctant to start swiftly raising production before seeing actual figures for how much Iranian oil will actually be lost and how tight the market will be.
Saudi Arabia's oil production in May is pretty much set and will differ "very little" from previous months, Reuters quoted al-Falih as saying in Riyadh today.
Last month, OPEC's de facto leader and largest producer Saudi Arabia followed through its commitment from February to cut deeper and pump well below 10 million bpd in March. Saudi Arabia's crude oil production dropped by a massive 324,000 bpd from February to stand at 9.794 million bpd in March-just as al-Falih had said the Kingdom would do. Saudi Arabia pumped around 9.8 million bpd in March, some 500,000 bpd below the 10.311-million-bpd commitment in the OPEC+ deal.
Speaking today, al-Falih said, as carried by Reuters:
"Inventories are actually continuing to rise despite what is happening in Venezuela and despite the tightening of sanctions on Iran. I don't see the need to do anything immediately."
Saudi Arabia intends to remain within its OPEC+ quota in May, the minister said, adding that "We think there will be an uptick in real demand but certainly we are not going to be pre-emptive and increase production."
OPEC and its partners will likely have "some level of production management beyond June," according to al-Falih, who reiterated that it was too early to predict details about targets and production.
By Tsvetana Paraskova for Oilprice.com
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Comments
In addition to the above, Saudi Arabia should also send a powerful message to President Trump telling him that if he wants Saudi-led OPEC to raise its production, the US Congress should in a quid pro que abandon its proposed NOPEC legislation altogether.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London