Oil gains on anticipation of sanctions on Iran

Sanctions against Iran to push oil prices to $90 a barrel – analysts

Sanctions against Iran to push oil prices to $90 a barrel – analysts

WASHINGTON - Saudia Arabia's leader has promised US President Donald Trump that the country will produce more oil if needed and that it has 2 million barrels per day of spare capacity, the White House said on Saturday.

Iran is the fifth-largest oil producer in the world, pumping about 4.7-million barrels per day (bpd), or nearly 5% of total output, much of it to China and other energy-hungry nations, such as India.

Trump said in a tweet he had asked the king for such an increase and the king had agreed.

Unless demand falls back, or some of these outages dissipate, oil prices could be heading much higher.

Last week, OPEC led by Saudi Arabia and its allies including Russian Federation agreed to boost oil supplies after curbing output since 2017 to address a global supply glut.

Saudi output in July is likely to show a further jump.

Oil prices rose strongly on Friday as United States sanctions against Iran threatened to remove a substantial volume of crude oil from world markets at a time of rising global demand.

In North America, an outage at Canada's Syncrude has locked in more than 300,000 bpd of production, and operator Suncor Energy said it will probably last at least through July.

"During the call, the two leaders stressed the need to make efforts to maintain the stability of oil markets and the growth of the global economy", said the state-run Saudi Press Agency. "If they do, it means the State Department is running OPEC".

Imports from Iran, which now is India's third largest supplier of oil after Iraq and Saudi Arabia, are likely to come down and will have to be replaced with more purchases from Saudi Arabia and Kuwait, they said, adding imports from Iran after November 4 will be possible only if Iran accepts alternates like rupee payments.

Saudi Arabia now produces some 10 million barrels of crude oil a day. Later on Saturday, the Saudi SPA news agency also reported about the conversation between Trump and Salman but has not mentioned the agreement announced by Trump.

"It basically leaves us with no spare capacity, at a time when Iran isn't the only issue", Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said in a Bloomberg television interview.

It's not clear the US will achieve a full halt, since even American allies are displeased with its unilateral abandonment of the deal that curbed Iran's nuclear program.

Meanwhile, Iran's Supreme Leader Ayatollah Ali Khamenei on Saturday accused the USA of trying to turn Iranians against their government.

"All the potential shortfalls could outstrip the production increase agreed to by OPEC and Russian Federation", said Dominick Chirichella, Director of Risk Management at EMI DTN.

"They bring to bear economic pressure to separate the nation from the system. but six US presidents before him tried this and had to give up", Khamenei was quoted as saying on Saturday by his website Khamenei.ir, referring to Trump.

Iran's rial currency has lost up to 40 per cent of its value since last month, when Trump pulled out of the 2015 nuclear deal.

"Kuwait will raise its oil production from tomorrow to 2.785 million barrels, a daily increase of 85,000 compared to May, based on last week's production cut agreement", Rashidi told Arabic-language daily Al-Rai.

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