US President Donald Trump said he persuaded Saudi Arabia to consider steps that would boost oil production, a move that would stretch the world’s biggest exporter to the limit and threaten to blow up a fragile truce agreed by OPEC last week.
“Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & dysfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference...Prices to high! He has agreed!,” Trump said on Twitter Saturday.
Saudi King Salman bin Abdulaziz and Trump, in a phone call Saturday, discussed efforts by the oil-producing countries to compensate potential shortages in oil supply, the state-run Saudi Press Agency reported. The two leaders stressed the importance of maintaining oil-market stability, according to the report. The agency didn’t say the leaders agreed or make any reference to 2 million barrels.
The telephone exchange is another sign of how US-Saudi ties have improved under Trump compared with the Obama administration, which alienated the kingdom by seeking a nuclear deal with Iran. Trump last year chose Saudi Arabia for his first foreign trip. Since then, the two governments have announced hundreds of billions of dollars worth of contracts, with Trump openly bragging about how many US jobs the Saudis were helping to create.
At a meeting of the Organisation of Petroleum Exporting Countries in Vienna last weekend, Saudi Arabia — the group’s largest producer —agreed to scale back its compliance with output cuts that have been in place since the beginning of 2017. Saudi Energy Minister Khalid Al-Falih indicated the group’s action would add nearly 1 million barrels a day to the market.
Brent crude, the global oil benchmark, topped $80 a barrel on May 17, the highest level since November 2014. It closed Friday at $79.44.
If Saudi Arabia were to respond to Trump’s request, it would stretch the world’s spare production capacity to the limit, meaning that any supply outage could have an outsized effect on oil prices. It would likely aggravate other OPEC members, such as Iran and Venezuela, which initially sought to prevent any increase as OPEC, along with allies led by Russia, headed into their Vienna meetings.
“We will be in uncharted territory,” Amrita Sen, chief oil analyst at Energy Aspects in London, said. “While Saudi Arabia has the capacity in theory, it takes time and money to bring these barrels online, up to one year,” she said. Saudi Arabia has the capacity to pump 12.04 million barrels a day, according to the International Energy Agency.