The Saudi state news agency reported today that the Kingdom is happy with Washington's decision to not extend the waivers for Iran oil sanctions that it had granted to eight large oil importers last November.
The agency quoted a statement from Saudi Arabia's Foreign Minister, Ibrahim bin Abdulaziz Al-Assaf, which said, "Saudi Arabia believes the US decision is a necessary step to pressure the Iranian government to stop jeopardizing peace and end their global support for terrorism."
Regarding oil production, Al-Assaf said Saudi Arabia will cooperate with other producers to make sure the gap left on international markets by the elimination of the waivers is filled.
Yesterday, an Iraqi government official said the country was ready to boost exports by 250,000 bpd in order to compensate for the loss of Iranian barrels. It seems the two largest producers in OPEC will work together to coordinate changes in production rates, which basically means the OPEC+ deal will be ending earlier than originally planned.
However, Bloomberg earlier today cited sources from Saudi Arabia as saying the Kingdom will not rush into reversing its production cuts. First, the source said, Riyadh will make sure that Iranian export shipments are indeed falling before it begins pumping more.
Related: The Firm Floor Under Oil Prices
The Bloomberg reports confirm an earlier one by Reuters, which also quoted a Saudi source as saying that Saudi Arabia was ready to reverse the production cuts to make up for lost supply from Iran.
Oil prices hit their highest level since the start of the year on news that the waivers for India, China, Japan, South Korea and a few smaller importers of Iranian crude oil would not be extended. China has been vocal in its opposition to the removal of the waivers while India has stated it would look to other suppliers to compensate for the cutoff of Iranian oil. South Korea and Japan do not expect any major negative impact from the cancelation of the waivers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
Saudi Arabia has become very wise to the United States’ ploys. It will never permit itself to be conned again by President Trump to raise its oil production to offset a so-called decline in Iran’s oil exports until it is sure that Iranian oil exports are indeed falling and that the global oil market is irrevocably re-balanced and oil prices are headed to $80 a barrel or higher being the price it needs to balance its budget.
In geopolitical terms, Saudi Arabia realizes why Russia’s popularity and respect in the Middle East and the world are soaring while the United States’ are plummeting. A case in point is Syria where Russia has been exemplary in its loyalty to Syria from which it hardly expects to get any economic or military benefits. Contrast this with the United States’ continuing to play Saudi Arabia against Iran in order to blackmail the Saudis and extract economic and military benefits from them. The United States has the tendency to drop its allies like a squeezed lemon once it has got all the juices from them.
Saudi Arabia also knows that President Trump will at some point threaten to sue Saudi-led OPEC for alleged oil price manipulation and cartel-like practices under the NOPEC legislation in order to blackmail the Saudis and OPEC members and extract some political and financial concessions from them.
Therefore, Saudi Arabia should request that the US Congress should abandon its proposed NOPEC legislation before deciding to raise its oil production in response to the ending of US sanction waivers.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London