Trump pressures Saudi Arabia to increase oil production

Oil refinery

Oil refinery

"Kuwait will raise its oil production from tomorrow to 2.785 million barrels, a daily increase of 85,000 compared to May, based on last week's production cut agreement", Rashidi told Arabic-language daily Al-Rai.

Brent crude, the worldwide benchmark, was selling Friday for over $79 a barrel, and there is talk that in certain circumstances a return to $100 a barrel oil is possible.

This comes barely days after the United States has asked countries to cut all oil imports from Iran by the start of November or else face powerful USA sanctions.

At the same time, factional fighting in Libya is causing a large outage, while the oil output of Venezuela, once a major producer, has fallen by around 1 million barrels a day over the last two years, with further steep declines possible in the coming months.

Iran opposed any changes to the original production-cut deal at a time when its oil industry is facing renewed sanctions over Trump's decision to quit the worldwide nuclear deal with Tehran.

"Once you get above that level, we are into uncharted territory", said David Fyfe, chief economist at the Gunvor Group, a major trading house.

USA retail unleaded gasoline prices, including taxes, averaged $2.833 a gallon for the week ended 25 June, according to the nation's Energy Information Administration.

JXTG Holdings recently bought 2 million barrels of West Texas Intermediate crude for arrival by September, according to three industry sources.

"However, there are only a few oil exporters who agreed on production cuts in early 2017 with significant spare capacity to increase output".

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"If this happens, (it) means Trump is asking Saudi Arabia to walk (away) from OPEC", he told Reuters.

Iranian exports have been running around 2.4 million barrels a day, according to the International Energy Agency.

'Saudi Arabia obviously can deliver as much as the market would need, but we're going to be respectful of the 1-million-barrel cap - and at the same time be respectful of allocating some of that to countries that deliver it, ' al-Falih said on Mpnday, prior to Trump's tweet. Saudi Energy Minister Khalid Al-Falih indicated the group's action would add almost one million barrels a day to the market.

Iran has accused Trump of trying to politicize OPEC and said it was United States sanctions on Iran and Venezuela that had helped push up prices. But broadcasting its requests on Twitter with a number that stretches credibility opens a new chapter in US-Saudi relations, Halff said.

Analysts said the outcome of the discussions between the Saudi and United States leaders may have far reaching benefits for both sides. "I think the difficulty for them is to distinguish what is a real ask from what is public posturing".

Besides the looming USA sanctions against Iran, which is fueling the rally in Brent futures, and the outage in Canada, which is supporting WTI crude, both markets are also benefitting from supply issues in Venezuela and Libya.

South Korea accounted for 14 percent of Iran's oil exports previous year, according to the US Energy Department.

On June 26, a senior State Department official said the United States wants to stop all exports of Iranian oil from November and is unlikely to offer any exemptions as it did during previous sanctions.

The State Department has said it expects the "vast majority" of countries will comply with the U.S. request.

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