Saudi Arabia is ready to increase its oil production in response to the expected decline in Iranian crude oil for international markets following President Trump’s withdrawal from the Iran nuclear deal. That’s what an official from the Saudi energy ministry told local state news agency SPA as quoted by Reuters.
Saudi Arabia supported Trump’s decision on the nuclear deal, unlike the United States’ allies in Western Europe: the heads of France, the UK, and Germany stated they are committed to upholding the Iran nuclear deal.
Russia and China—also signatories to the deal—have opposed Trump’s decision and are unlikely to make any changes to their economic relations with Iran following the U.S. withdrawal. While Russia is not a consumer of Iranian oil, China and India are—and they are unlikely to stop taking in Iranian crude despite the sanctions.
“Following the U.S. decision to withdraw from the nuclear agreement with Iran, Saudi Arabia is committed to supporting the stability of oil markets for the benefit of producers and consumers and the sustainability of the global economic growth,” the Saudi official said.
Analysts estimate that, depending on how many countries decide to stop importing Iranian crude to avoid angering Trump, the availability of Iranian crude could fall by anywhere from 300,000 bpd and 1 million bpd. The last time the U.S. imposed sanctions on Tehran, its crude oil exports shrank by a million barrels per day.
Japan and South Korea are the most likely to shun Iranian crude to stay on President Trump’s good side. As Ehsan Khoman, head of MENA research at Mitsubishi UFJ put it, “certain U.S. allies, including Japan and South Korea, may comply with the proposed U.S. reimposition of Iranian sanctions on the concern of losing the U.S. security umbrella vis-à-vis North Korea.”
Whatever sanctions the U.S. decides to impose on Iran, these will take time to effect oil prices. If Saudi Arabia begins expanding its oil production now, this will likely have a weakening effect on prices.
By Irina Slav for Oilprice.com
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