Donald Trump says Saudi king has agreed to ramp up oil production

Daniel Fowler
July 1, 2018

The Trump administration is pushing other countries to cut all imports of Iranian oil, while it slapped further trade sanctions on Venezuela last month.

That might be fine by Trump, who earlier this month blamed rising prices on OPEC, but has fostered close ties to Saudi Arabia.

Saudi Arabia's official government press agency gave a more ambiguous description of the king's discussion with Trump.

President Donald Trump says he has received assurances from King Salman of Saudi Arabia that the kingdom will increase oil production, "maybe up to 2,000,000 barrels", in response to turmoil in Iran and Venezuela. "He has agreed!" read the tweet.

According to Bloomberg, Saudi state media have confirmed a phone call between Trump and King Salman took place, but have not confirmed any agreement on production increases. It said they had discussed the need to "preserve the stability of the oil market".

US President Donald Trump (L) with Saudi King Salman during a visit in 2017 to Saudi Arabia. At the meeting's conclusion, OPEC, in agreement with Russian Federation, announced that it would increase production for the first time since implementing production cuts in November 2016.

Oil prices have spiked in the past week, and on Thursday crude rose above $74 a barrel for the first time since late 2014.

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Saudi Arabia along with other Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations, including Russian Federation, had agreed on June 22 to boost production by a combined 700,000 to 1 million barrels a day, so any 2 million bpd-increase would be at least double market expectations.

Last week, members of the OPEC cartel led by Saudi Arabia, and non-cartel members, agreed to pump 1 million barrels more crude oil per day, a move that should help contain the recent rise in global energy prices.

Russia, Iraq, the UAE and Kuwait jointly have another million barrels, so there is spare production of 3 million barrels a day. Saudi oil officials did not comment.

Meanwhile, UK-based energy consultancy group, Fact Global Energy (FGE), reported in its June newsletter that Washington is determined to "push Iran's exports to zero". It did not mention the two million barrel increase.

Oil prices have been on a recovery mode since 2016 and interestingly the momentum is still continuing even after worries about the trade stand-off between the USA and its allies which send global stocks and commodities tumbling down.

Benchmark Brent crude LCOc1 was around $79 a barrel on Friday and a Reuters poll showed prices look to remain strong for the rest of this year due to supply disruptions in countries including Libya and Venezuela and the extra oil from OPEC fails to meet rising demand.

The United States has been seeking to convince countries to halt imports of Iranian oil from November, when Washington will re-impose sanctions after pulling out of the deal aimed at halting Iran's nuclear ambitions.

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