Saudi Energy Minister: Cant cover Iran's oil production

Lloyd Doyle
October 23, 2018

Khalid al-Falih said if the kingdom has to use its oil reserves if it wants to cover 3 million barrels per day of oil loss from Iran.

Moreover, Saudi Arabia's pledge to fulfill any oil demand due to Iran export drop by playing a "responsible role" in energy markets, collaborated to the downside in the black gold.

Falih said Saudi Arabia would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million.

Traders have been underpinning prices since late last week on the notion that the Saudi's would cut crude supply in retaliation for potential sanctions against it over its involvement and attempted cover-up of the Khashoggi killing. US West Texas Intermediate (WTI) crude futures were at $69.16 a barrel, dropping 20 cents, or 0.3%, from their last settlement. Earlier in the day, WTI traded as low as $68.27, its lowest since September 14.

Russian Federation and Iran reportedly agreed last month to a deal allowing Iran to evade the USA sanctions on Tehran's oil exports, Israel's Hadashot TV news reported earlier this month, citing a document by the Israeli Foreign Ministry as warning.

Al-Falih's remarks flatly contradicted those by Saudi Crown Prince Mohammed bin Salman, who claimed earlier this month that his country has "already replaced" Iranian crude lost to the U.S. sanctions.

Saudi credit default swaps, a form of insurance against a sovereign debt default, have shot up to near one-year highs over the past week, reflecting investor nervousness.

The US sanctions on Iran´s oil sector will come into effect from November, 4, as the US seeks to reduce Iranian oil exports to zero.

Iran, the third-largest producer of the Organization of Petroleum Exporting Countries (OPEC), has blamed US President Donald Trump for oil price hikes, but the US president has pointed the finger at OPEC and called on the oil-producing body to boost output. Meanwhile, Iran's oil minister Bijan Zanganeh has said that Saudi Arabia and Russian Federation can not replace Iran' oil as the production capacity of the two countries has reached its peak.

An internal document reviewed by Reuters suggested OPEC is struggling to add barrels as an increase in Saudi supply was offset by declines elsewhere, including Iran and Venezuela.

While Saudi Arabia is intent on making up for lost barrels, the outlook for demand next year is deteriorating.

OPEC estimates demand for its crude will fall to an average of 31.8 million bpd next year, from an average 32.8 million bpd this year.

Other reports by Iphone Fresh

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