Published: Fri, July 06, 2018
Business | By Pearl Harrison

U.S. looks for support on Iran crude embargo

U.S. looks for support on Iran crude embargo

"However, the Saudis must exercise care in setting OSPs as higher prices may entice buyers like China to consider Iran imports". The announcement was made following a cabinet meeting headed by Saudi Arabia's King Salman bin Abdulaziz Al Saud.

Saudi Arabia said it would "use its spare capacity when needed to deal with any future changes in oil supply and demand rates, in coordination with other producing countries", according to a report by the Saudi Press Agency.

Saudi Arabia is the world's top oil exporter and has usually kept at least 1.5 million to two million barrels per day of spare capacity, according to the US Energy Information Administration.

"They seek to push Iranian exports of crude, condensate, and oil products to zero", energy consultancy FGE said in a note. "If anything, they are driving prices higher as the United States defends many of their members for very little $'s".

Abu Dhabi said it's ready to increase oil output in line with guidance set by OPEC and allied producers.

OPEC's June output was 32.32 million barrels per day (bpd), a Reuters survey showed on Monday, up 320,000 bpd from May.

"The Iranian government has a plan. and God willing we are certain that we will be able to sell as much oil as we want", he said.

Despite the apparent supply relief from Saudi Arabia, oil markets remain tense over escalating trade disputes between the United States and other major economies including China, the European Union, India and Canada, as well as the looming new U.S. sanctions against Iran.

However, with Saudi Arabia, leader of the OPEC and non-OPEC coalition agreeing to tighten supply breaking the agreement, there could be an avalanche from other countries like Russian Federation and Iran and Iraq already angling to increase its production. Trump's tweet offered no timeframe for the additional 2 million barrels - whether that meant per day or per month.

The drop is in contrast to the strong growth in oil prices seen last week as prices started to nudge close to $80 per barrel. Canadian oil prices are poised to continue their slow, steady march upward next year as shipping bottlenecks ease and USA refiners look north to fill the gap created by decreasing output from Venezuela, according to Deloitte.

A similar situation occurred last month with two other ports and the National Oil Company has confirmed that the blockages are cutting oil production by 850,000 barrels per day, further tightening global supply. The two main importers of Iranian crude are China and India; both of whom import around 400,000 BPD now.

The State Department has said it expects the "vast majority" of countries will comply with the USA request.

President Trump himself tweeted on June 30th, "Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference.Prices to high!"

India, the biggest buyer of Iranian oil after China, already asked refiners on Thursday to prepare for a "drastic reduction or zero" of imports of Iranian oil in order to protect its exposure to the USA financial system.

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