Saudis to pump 2mn more barrels of oil

Daniel Fowler
July 5, 2018

The decision comes in the wake of rising price of oil in the worldwide market due to supply issues from Iran. Also, they probably can't do it immediately, it would take time, perhaps more than a year.

"The draw in distillates was against expectations", said Sukrit Vijayakar, managing director of energy consultancy Trifecta.

Traders also cited chatter in the market that Mr. Trump would decide to tap the Strategic Petroleum Reserve for extra barrels of crude.

Paradoxically, U.S. President Donald Trump, with one eye on the U.S. driving season ahead of the U.S. 4 of July holiday, has been grumbling about high oil prices and on Jun.30 tweeted that he had directly asked Saudis to open the taps to make up for the shortfall. However, we would urge the United States, which has proven oil reserves of 36.2 billion barrels, that it too should increase production and come to the rescue of the global community. "Any country or company that opposes Trump's request will be blacklisted and American markets will be closed to it".

The Canadian Dollar fell following the news, bucking a recent move higher versus the US Dollar.

Saudi Arabia's spare production capacity is estimated to be around 2 million barrels per day.

"We are confident that there is sufficient global spare oil production capacity", he added.

China's customs agency said on its website that Chinese tariffs on US goods would immediately be implemented in retaliation.

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Oil briefly touched $75 a barrell on Tuesday before retreating following the news of the Saudi government decision.

Brent oil rose on Wednesday, driven higher by a threat from an Iranian commander and a drop in USA crude inventories for the second week in a row.

"It's mostly to do with the volatility coming from the rhetoric between the United States and Opec".

"Saudis are used to USA requests for oil", Halff said. Western oil suppliers keep 90 days worth of reserve oil supplies on hand, but they generally only use them in emergencies.

The US State Department has spelled out a campaign of "maximum economic and diplomatic pressure" to drive Iran towards negotiating a "better" deal to replace the Iran nuclear deal.

While U.S. sanctions against Iran may prompt Asian buyers, including Japan and South Korea, to cut back purchases from OPEC's third-biggest producer- or even halt buying completely - China may be more willing to continue importing and pick up additional barrels, undercutting Saudi supplies, he said.

Saudi Arabia's Tadawul All Share Index (TASI) jumped 15 percent, or 1,088 points, to close at 8,314 in H1 2018, compared to 7,226 points at the end of 2017.

"The decision by the US administration is expected to be taken on Friday and China is expected to retaliate immediately", said Hussein Sayed, Chief Market Strategist at futures brokerage FXTM.

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