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June 30, 2018

Trump says Saudi king agreed to raise oil production up to 2 mln barrels

Trump says Saudi king agreed to raise oil production up to 2 mln barrels
FILE PHOTO: U.S. President Donald Trump speaks to the press aboard Air Force One en route to Bedminster, New Jersey, from Joint Base Andrews, Maryland, U.S., June 29, 2018. REUTERS/Eric Thayer

By Lesley Wroughton and Stephen Kalin

WASHINGTON/RIYADH (Reuters) – U.S. President Donald Trump said in a tweet on Saturday that Saudi Arabia’s King Salman had agreed to his request to increase oil production “maybe up to 2,000,000 barrels” to offset a decline in supplies from Iran and Venezuela.

Trump tweeted: “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! He has agreed!”

He did not specify if the figure was barrels per day (bpd).

During the call, the Saudi king and Trump emphasized the need to preserve oil market stability and efforts of oil-producing countries to compensate for any potential shortage, Saudi state media reported on Saturday.

The statement reported by Saudi media did not mention any intention by Saudi Arabia, the world’s top oil exporter, to raise production to 2 million barrels per day. Saudi oil officials did not immediately comment.

Saudi Arabia has a maximum sustainable capacity of 12 million bpd, but the world’s top oil exporter and Organization of Petroleum Exporting Country’s biggest producer has never tested that high level of production.

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

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.

Riyadh plans to boost output to 11 million bpd, the highest in its history, in July up from 10.8 mln bpd in June, a source familiar with Saudi output plans told Reuters this week.

It was not immediately clear at what level of production Trump was referring to or by when.

“We will be in uncharted territory. While Saudi Arabia has the capacity in theory, it takes time and money to bring these barrels online, up to one year,” said Amrita Sen of consultancy Energy Aspects.

Saudi Energy Minister Khalid al-Falih met with U.S. Secretary of State Mike Pompeo in Washington on Thursday to discuss energy security.

The Trump administration is pushing countries to cut all imports of Iranian oil from November when the United States re-imposes sanctions against Tehran, after Trump withdrew from a 2015 nuclear deal agreed between Iran and six major powers, calling it a “defective” agreement.

That agreement sought to curb Tehran’s nuclear capabilities in exchange for the lifting of some sanctions. Trump ordered the re-imposition of U.S. sanctions against Iran that were suspended under the accord.

U.S. officials are pressing allies in Europe, Asia and the Middle East to adhere to the sanctions, which are aimed at pressuring Iran to negotiate a follow-up agreement to halt its nuclear programs.

State Department officials said this week the United States is prepared to work with countries on a case-by-case basis to help them reduce imports of Iranian oil and suggested some exemptions were possible.

Iran’s Supreme Leader Ayatollah Ali Khamenei on Saturday accused Washington of trying to turn Iranians against their government.

“They bring to bear economic pressure to separate the nation from the system … but six U.S. 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 nuclear deal

Iran’s OPEC governor, Hossein Kazempour Ardebili, accused the United States and Saudi Arabia of trying to push up oil prices and said both countries are acting against the foundation of OPEC.

“If this happens, (it) means Trump is asking Saudi Arabia to walk (away) from OPEC,” he told Reuters.

“The market will go up to $100 I am sure as Saudi Arabia said they will plan an increase for July … This was managed between the two to rob the pocket of rest of the world.”

Kuwait planned to raise oil output by 85,000 barrels per day starting on Sunday, part of an agreement between OPEC and non-OPEC producers to increase production by one million bpd, its Energy Minister Bakhit al-Rashidi said on Saturday.

“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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