Saudis pumping oil per Trump request, then doubt the need

23 Julio, 2018, 08:19 | Author: Arnold Perez
  • Oil Prices Gain As US Drillers Cut Oil Rigs

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Under pressure from President Donald Trump, Saudi Arabia has rushed to increase oil production - only to discover that global markets might not yet need it.

Saudi Arabia's pledge to keep its crude production steady followed an agreement last month between OPEC and its partners, including Russian Federation, to boost production by 1 million barrels per day.

The kingdom initially planned record output of 10.8 million barrels per day, people briefed on output policy said last month.

US shale production remains robust, with the US Energy Information Administration forecasting a record 7.47 million b/d to hit the market next month. -China trade war stoked fears about the strength of demand. Mr Trump said in a CNBC interview he was ready to impose tariffs on all $500 billion of imported goods from China. ICE Brent futures were trading at $73.07/b at 1352 GMT.

Signs of Russian Federation and Saudi Arabia increasing oil production, as well as last week's surprise build in USA crude stocks, have also weighed on prices, said Tariq Zahir, analyst at Tyche Capital Advisors.

"Despite the global oil markets being well balanced in the third quarter, there will still be substantial stock draws due to robust demand and seasonality factors in the second half", Al-Aama said in a statement.

He also said concerns that Saudi Arabia and its partners are moving to substantially oversupply the market are "without basis". OPEC agreed to slash the output by 1.2 million barrels per day from January 1.

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Prices also received a boost after OPEC's largest oil producer, Saudi Arabia, said it would temper its exports next month.

But Aama's statement may indicate that Iran, Saudi Arabia's primary OPEC antagonist and which had sent a delegation to the meeting, has been appeased for now that the kingdom was not planning to ramp up production further and key on Iran's market share.

To be sure, supply risks still remain.

Crude oil futures were mixed during mid-morning trade in Asia Friday, reacting to comments by Saudi Arabia on OPEC production and Norway restarting the Knarr oil Field.

After a hard 2017 in which Saudi Arabia's economy contracted by 0.7 per cent year-on-year, the economy began to recover in the first quarter of 2018, growing by 1.2 per cent year-on-year compared with a 1.2 per cent fall in the fourth quarter of 2017.

"WTI will likely be buoyed above US$65 and Brent above US$70 for a while, but as uncertainties remain over the trade dispute between the U.S. and China, we'll continue to have some downward pressure", Hong said.

A group of Norwegian drilling rigs workers agreed on Thursday to end a strike that began on July 10, removing a threat to oil and gas production in the region.

Expect more price volatility ahead, said Stephen Brennock, an analyst with brokerage PVM Oil Associates.

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