Economy

Trump says Saudi king agrees to raise oil output by 2m barrels

Trump says Saudi king agrees to raise oil output by 2m barrels

"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, noting the risk that supplies from Iran could be cut further if other countries follow the USA lead and cut imports from that country, the fifth-largest oil producer in the world.

Meanwhile, an industry source familiar with Saudi Arabia's oil production plans told Reuters on Tuesday that the kingdom plans to pump up to 11 million barrels of oil per day (bpd) in July, the highest in its history, up from about 10.8 million bpd in June.

King Salman and Trump agreed that oil-producing countries would need "to compensate for any potential shortage of supplies", according to the agency.

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

As such, the addition of 1 mb/d from Saudi Arabia alone would lead to the OPEC+ group exceeding the production levels they just committed to, after factoring in additions from Russian Federation and other Gulf States.

"Once you get above that level, we are into uncharted territory", said David Fyfe, chief economist at the Gunvor Group, a major trading house. "Triple-digit oil prices are not off the table".

Japan's Fuji Oil Co., which will not make a final decision until after discussions with the government and other refineries, will likely replace Iranian shipments with shipments from Saudi Arabia, Qatar, and the United Arab Emirates if it has to.

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"The clear message from the OPEC+ meetings was that those countries with spare capacity would increase production to keep the market well-supplied", U.S. Jefferies bank said on Friday. OPEC and Russian Federation reached a complicated agreement during the talks, with OPEC agreeing to pump more oil - but perhaps not as much as some had expected. If the U.S.is successful at convincing most countries to stop buying oil from Iran, the outages could rise to as high as 2 mb/d, although that remains speculation.

"I think it will contribute significantly to meet the extra demand that we see coming in the second half", Saudi Energy Minister Khalid al-Faleh told reporters at the time. "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.

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

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. "This was managed between the two to rob the pocket of rest of the world", he said.

Arabic-language daily Al-Rai, a local newspaper.

Last week, OPEC countries and other major oil producers that participate in the 2016 Vienna cut deal agreed during a meeting in the Austrian capital to increase production to 1 million barrels per day, that is the volume of the countries' overcompliance with the agreement.

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