LONDON:Ƶ has said it is ready to use its spare production capacity in order to help balance the global oil market, according to a Cabinet statement released on Tuesday.
The Kingdom, which has been pumping around 10 million barrels per day, holds the largest spare capacity in the world and is the only country that can add substantial supply to the market.
“The Cabinet ... affirmed the Kingdom’s readiness to use its spare capacity when needed to deal with any future changes in oil supply and demand rates in coordination with other producing countries,” read a statement released by the Saudi Press Agency.
The Cabinet statement follows the US President Donald Trump’s tweet on Saturday that said that Ƶ had agreed to ramp up oil production to bring down global prices.
He tweeted the Kingdom could pump “maybe up to 2,000,000 barrels,” presumably meaning barrels a day. This increase is needed to cope with the “turmoil and dysfunction in Iran and Venezuela,” Trump tweeted.
Ƶ’s spare production capacity is estimated to be around 2 million barrels per day. The Kingdom did not initially confirm Trump’s tweets and the White House at first backed away from the comments.
Ƶ’s announcement on Tuesday comes just over a week since OPEC and non-OPEC producers including Russia agreed to increase production by 1 million barrels per day from the start of this month. The move partly reversed the original OPEC+1 deal which came into force in January last year and was designed to reduce the global glut in oil.
The planned production increase was intended to balance the market as global oil prices have been steadily rising, edging closer to $80 per barrel last month. Yet the announcement, on June 23, initially caused prices to rise.
Trump’s plans to impose sanctions on Iran, coupled with low production from Venezuela and blockades on some ports in Libya have continued to tighten global supply, pushing up oil prices.
Tuesday’s announcement could see prices start to decline, suggest some analysts.
“Ƶ’s readiness to utilize its spare production capacity which is estimated at 2 million barrels could spell trouble for oil bulls down the road,” Lukman Otunuga, research analyst at FXTM, told Arab News.
“Although geopolitical risk factors ranging from suspended oil exports from Libya, falling production in Venezuela and US sanctions on Iran have supported oil, the oversupply concerns could make a return.
“Investors should keep in mind that US shale production remains robust while global trade tensions present a threat for global growth, and this may translate to less demand for commodities.
“If geopolitical risk factors impacting oil start to ease and demand declines on slowing growth, oil may witness heavy losses. The immediate reaction following the announcement has been negative, with WTI trading around $73.67 (on Tuesday afternoon).”
The UAE’s energy minister and current OPEC president for 2018, Suhail Al-Mazrouei, on Tuesday said that the UAE stood ready to help tackle any potential oil shortage, while underlining that OPEC will continue to adhere to “overall conformity levels” for the rest of 2018, according to Reuters report.
“OPEC will, from July 1, strive to adhere to the overall conformity levels for the remaining duration of the Declaration of Cooperation,” he said in a statement cited by the news agency.
* During the cabinet meeting, King Salman also said millions of visitors performed Umrah rituals during the holy month of Ramadan easily and comfortably, and expressed his appreciation to all governmental and private sector employees for their efforts.
In the same context, the cabinet praised the statement issued after the meeting held in Makkah on the economic crisis in Jordan, called for by King Salman. King Abdullah II of Jordan, Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah, Emir of Kuwait, Sheikh Mohammed bin Rashid Al-Maktoum, Vice President, Prime Minister of the UAE and Ruler of Dubai attended the meeting.
The Cabinet praised the statement issued after the meeting in Makkah on the economic crisis in Jordan. The UAE, Kuwait and Ƶ agreed an aid package for Jordan of $2.5 billion.
The Cabinet was briefed on Crown Prince Mohammed bin Salman’s visit to Russia.
The cabinet praised the Kingdom and the UAE’s adoption of a joint strategy for integration between the two countries economically, developmentally and militarily through 44 projects called “Resolve Strategy.”
The cabinet affirmed that the launch of the Saudi Project for Landmines Clearance in Yemen, carried out under the King Salman for Humanitarian Aid and Relief Center, is an extension of the history of the Kingdom, which has been providing aid where more than 600,000 landmines have been found, as well as 130,000 sea mines, and 40,000 mines in Marib governorate and 16,000 mines in Muen Island.
