U.S. President Donald Trump's administration has backed off an assertion he made last week indicating he persuaded Saudi Arabia to effectively boost oil production to its maximum capacity, which would have threatened to blow up a fragile truce agreed by OPEC and inflamed the Saudi-Iran rivalry.
"Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil ... 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... He has agreed!" Trump said Saturday on Twitter.
But in a statement Saturday evening, the White House said King Salman bin Abdulaziz affirmed that Saudi Arabia has 2 million barrels a day of spare production capacity "which it will prudently use if and when necessary to ensure market balance and stability, and in coordination with its producer partners, to respond to any eventuality."
The White House statement aligned with one by the state-run Saudi Press Agency saying that the king and Trump, in a phone call Saturday, discussed efforts by the oil-producing countries to compensate for potential shortages in oil supply. The two leaders stressed the importance of maintaining oil-market stability, according to the report. The agency didn't say the leaders agreed and didn't make any reference to 2 million barrels.
In an interview taped on Friday and aired Sunday on Fox News Channel, Trump put the blame for rising oil prices on OPEC, which he said is "100 percent" manipulating the world market and "must stop.They have to put out another 2 million barrels in my opinion."
Iran Oil Minister Bijan Namdar Zanganeh said any production increase above limits agreed to by OPEC would "breach" the deal, according to a letter he sent to OPEC President Suhail Al Mazrouei and distributed by the Iran Oil Ministry's news service. OPEC should reject the U.S. call for a production increase which is "politically motivated against Iran," he said.
The telephone exchange is another sign of how U.S.-Saudi ties have improved under Trump compared with President Barack Obama's administration, which alienated the kingdom by seeking a nuclear deal with Iran. Trump last year chose Saudi Arabia for his first foreign trip. Since then, the two governments have announced hundreds of billions of dollars worth of contracts, with Trump openly bragging about how many U.S. jobs the Saudis were helping to create.
If the Saudis had agreed to Trump's request, "that means he is calling on them to walk out from OPEC," Iran's OPEC governor, Hossein Kazempour Ardebili, said in an interview. "There is no way one country could go 2 million barrels a day above their production allocation unless they are walking out of OPEC."
At a meeting of the Organization of the Petroleum Exporting Countries in Vienna last weekend, Saudi Arabia -- the group's largest producer -- joined other members in agreeing to scale back its over-compliance with output cuts that have been in place since the beginning of 2017. Saudi Energy Minister Khalid Al-Falih indicated the group's action would add nearly 1 million barrels a day to the market.
U.S. retail unleaded gasoline prices, including taxes, averaged $2.856 Monday, according to AAA. That's up about 55 cents from the same period last year, at a time Trump's Republican Party is trying to hold on to its majorities in Congress in the November elections.
Saudi Arabia has the capacity to pump a maximum of 12.04 million barrels a day, according to the International Energy Agency. The kingdom pumped slightly more than 10 million barrels a day in May.
Trump last month blamed OPEC for oil prices being too high, reprising comments he made on Twitter in April. At meetings in Vienna on June 22-23, OPEC and its allies cobbled together a delicate accord in order to satisfy some producers, like Iran and Venezuela, which wanted to limit output, and others like the Saudis, which sought to ease away from the supply cuts.
The curbs were intended to help drain a global oil glut, a goal that has largely been achieved, though supply disruptions are now adding pressure to prices. Venezuela is in the midst of an economic crisis, which has caused oil production to plummet. In Libya, where a dispute over control of key ports has hindered output, the Arabian Gulf Oil Co. on Saturday halted 220,000 barrels a day of production, according to a person familiar with the outage.
The U.S. will grant waivers "on a case-by-case basis" so countries can buy Iranian oil after American sanctions are reimposed, a State Department official said Monday, softening the Trump administration's stance as it seeks to isolate the Islamic Republic after quitting the Iran nuclear deal.
Information about this article was contributed by Nick Wadhams of Bloomberg News.
Business on 07/03/2018