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Saudi Arabia not confirming Trump's 2M barrels

02 July 2018

"In response to the approval of the President (trump - if) on the deficit in the oil market, king Salman affirmed that the Kingdom has a reserve production of 2 million barrels per day, which can be used if necessary to stabilize the market", - reads the statement released by the White house.

The Saudi Press Agency said Trump had called Salman and the two highlighted "the necessity of doing efforts to preserve the stability of the oil market and the global economy growth".

Iran has accused Trump of trying to politicise Opec and said it was United States sanctions on Iran and Venezuela that helped push up prices.

A gallon of regular gasoline sold on average in the USA for $2.85, up from $2.23 a gallon previous year, according to AAA.

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Trump's aim may be to exert maximum pressure on Iran while at the same time not upsetting potential midterm voters with higher gas prices, said Antoine Halff, a Columbia University researcher and former chief oil analyst for the International Energy Agency.

It is pertinent to mention here that Iran, OPEC's third-biggest oil producer, exports more than 2 million barrels a day.

The output increases come as the United States has urged some OPEC members to raise output to compensate for supply losses caused by renewed USA sanctions on Iran.

Washington said last week it was asking customers in Asia and Europe to reduce Iranian oil purchases to zero from November, and that it will not grant any waivers to sanctions.

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US oil prices have been boosted by falling domestic stocks - the US Energy Information Administration on Wednesday revealed that crude supplies dropped by 9.9 million barrels for the week ended June 22-the largest weekly drop so far this year. "He has agreed!" President Trump tweeted.

After the US State Department on Tuesday urged allies and companies to stop buying crude oil from Iran by 4 November, global benchmark Brent crude gained 6.5 per cent and American benchmark West Texas Intermediate jumped 9.3 per cent between Tuesday and Friday. Saudi Energy Minister Khalid Al-Falih indicated the group's action would add almost 1 million barrels a day to the market. "We maintain our Brent crude forecast of $70.80 per barrel for 2018 and $66 for 2019, following the OPEC meeting, though highlight some moderate upside risks for 2018", she said.

Saudi Arabia, for instance, says it has 2 million barrels a day in spare capacity, but analysts are skeptical that it can easily and sustainably add more than 700,000 barrels of production a day without drilling and other work that would take time. The kingdom pumped slightly more than 10 million barrels a day in May.

The Trump administration has been counting on Saudi Arabia and other OPEC members to supply enough oil to offset the lost Iranian exports and prevent oil prices from rising sharply. "The re-imposition of sanctions on Iran may have been factored into the rapid increase in oil prices in recent months", Iradian added.

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Trump wrote on Twitter that he had asked the king in a phone call to boost oil production "to make up the difference..."

Saudi Arabia not confirming Trump's 2M barrels