Published: Wed, July 11, 2018
Business | By Kate Woods

Doubts if Saudis can replace lost Iranian barrels

Doubts if Saudis can replace lost Iranian barrels

"Our goal is to increase pressure on the Iranian regime by reducing to zero its revenue from crude oil sales", a senior State Department official told a news briefing this month. If the United States administration were to order a complete cutoff of Iranian barrels before the end of the year, oil could surge to more than $120 a barrel, analysts argued.

Brent crude futures settled down 86 cents, or 1.1 percent, at $76.46 a barrel.

"We estimate that every million bpd shift in supply and demand balances would push the oil price by $17 bpd on average".

When President Trump Tweeted last week that Saudi Arabia agreed to begin pumping additional oil to make up for the removal of Iran from the global markets, the Saudis very quickly corrected him, saying that while they could increase capacity if needed, no promise to do so had been made.

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If Saudi Arabia needs to replace Iranian barrels, most of the increase will have to come from more pumping rather than stock releases, and it would require producing more oil than Saudi Arabia has ever pumped before.

Saudi Arabia has reported roughly similar production numbers to JODI, with output peaking at 10.72 million bpd in November 2016 (https://tmsnrt.rs/2NwQzpZ). "And even in the recent period, we have observed a steep decline in domestic Saudi oil inventories".

"In this game of chicken, we expect someone will blink before that happens", they wrote.

In his latest tweet on the subject on Wednesday, Trump said that the "OPEC Monopoly must remember that gas prices are up & they are doing little to help".

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Mazrouei, who also serves as energy minister of the United Arab Emirates, said OPEC member crude producers had enough capacity to handle any unforeseen global supply disruptions. "There are things outside of our hand, the geopolitics as well as how much production is coming from the shale oil and Canadian sands".

Zanganeh said that exerting pressure as such was against the principles of the Organization of the Petroleum Exporting Countries (OPEC) in which both Saudi Arabia and Iran are founding members.

Iran's petroleum minister said that "political issues should not interfere in the crude market, and supply and demand should determine the final oil price".

Baker Hughes energy services firm said in its report on Friday that U.S. crude prices jumped to their highest since November 2014 earlier this week.

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