Trump asks Saudi Arabia to increase oil production

2017 shows an oil facility on Khark Island on the Gulf. The US warned this week that countries must stop buying Iranian oil before November 4 or face economic sanctions. A State Dept official said tightening the noose on Tehra

2017 shows an oil facility on Khark Island on the Gulf. The US warned this week that countries must stop buying Iranian oil before November 4 or face economic sanctions. A State Dept official said tightening the noose on Tehra

This week, a tweet by President Donald Trump claimed he had persuaded Saudi Arabia to up their oil production by a couple of million barrels to help stabilize petrol prices in the country.

The Trump Administration is piling pressure on India, China, and other buyers to end all imports of Iranian oil by a November 4 deadline as it looks to choke the Persian Gulf State's economic lifeline with sanctions over its nuclear programme.

That decision is taken jointly by the Organization of the Petroleum Exporting Countries (OPEC), and not at the behest of the American President.

They also discussed "efforts by the oil producing countries to compensate for any potential shortage in supplies", it added.

Major buyers of Iranian oil, including Japan, India and South Korea, have indicated they may stop importing Iranian crude if USA sanctions are imposed.

"The threat of tariffs on US oil imports (by China) could alter the usual seasonality of oil flows", said Daniela Corsini, commodity market economist at Intesa Sanpaolo in Milan. The Saudi leader said he was ready to raise output if needed, the White House said in a statement.

As the summer driving season moves into high gear, retail gasoline prices have been as high as $2.96 a gallon, according to the Energy Information Administration.

Shale oil production is at its peak in the U.S., with refineries operating at its highest average capacity utilisation due to record worldwide demand.

If Saudi Arabia were to respond to Trump's request, it would stretch spare production capacity to the limit, meaning that any supply outage could have an out-sized effect on oil prices. The International Energy Agency, the Paris-based group that represents consumer countries, recently estimated what it called "short order supply" from the Middle East, including Saudi Arabia, at 1.14 million barrels a day.

At the same time, factional fighting in Libya is causing a large outage, while the oil output of Venezuela, once a major producer, has fallen by around 1 million barrels a day over the last two years, with further steep declines possible in the coming months.

Vienna-based consultancy JBC Energy said the stronger the implementation and enforcement of United States sanctions, the higher the oil price will go.

Interestingly the EIA production data has shown no increase for U.S. crude output for three weeks now at 10.9 million barrels a day.

Saudi Arabia now produces some 10 million barrels of crude oil a day.

The news agency also reported Saturday that Saudi Energy Minister Khalid al-Falih said the kingdom will increase output by hundreds of thousands of barrels, with exact figures to be determined later.

A majority of analysts who participated in the poll, however, said they did not expect a significant impact in the short term from the trade dispute between the United States and other major economies including China. Among its disclosures are what it says has been its expenditure, along with its project partners, of more than US$24 million with more than 300 local suppliers previous year.

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