Oil Minister Bijan Namdar Zanganeh says Saudi Arabia and the United Arab Emirates presumably overstate their ability to produce higher levels of crude oil as demanded by the United States.
“I presume they (Saudi Arabia and the UAE) are exaggerating their oil production capacities,” the minister said.
IRNA further quoted him as saying that “The US oil sanctions are not a bluff and reflect (the growing) animosity toward our country.”
The minister made the statement in response to western reports and oil analysts that the two Arab states and close US allies can and will fill any gap caused by a tightening of US sanctions on Iranian oil exports.
A senior US administration official said Monday President Donald Trump was confident Saudi Arabia and the United Arab Emirates would fill any gap in the market.
Saudi energy minister said Wednesday that he saw no need to raise oil output immediately after the United States ends its waivers, but added that the kingdom would respond to customers’ needs if asked for more oil.
The kingdom’s exports in April will be below 7 million barrels per day, while production is around 9.8 million bpd, Saudi officials have said. Under the OPEC-led deal on supply cuts, Saudi Arabia can pump up to 10.3 million bpd.
“There is roughly a million barrels per day of Iranian crude exports left, and there is plenty of supply in the market to ease that transition and maintain stable prices,” Brian Hook, US special representative for Iran, said on Thursday.
Washington said this week that it will not extend the waivers it granted to buyers of Iranian oil last year.
Unplanned Outage
Saudi Arabia and UAE might theoretically address the gap but for every barrel the Saudis and other producers pump to offset the drop in Iran’s exports, they have one less barrel at their disposal when an unplanned outage hits the market, said Matt Smith, director of commodities research at tanker-tracking firm ClipperData.
Cutting into this spare capacity typically boosts oil prices because it leaves the market with little insurance against supply shocks.
Analysts do not think the kingdom will unleash a flood of oil. That’s because the Saudis fear a repeat of last year’s price collapse, which was caused in part by OPEC hiking output proactively ahead of the renewal of US sanctions on Iran in November.
“I do think they’ll come through, but they are not going to be as enthusiastic this time around as they were, I think, in November,” said John Kilduff, founding partner at energy hedge fund Again Capital.
For the current six month OPEC agreement, Saudi Arabia has actually claimed to be producing below its allocated 10.3 million barrels per day. Therefore, until the end of June, Saudi Arabia can overproduce because OPEC judges compliance based on a 6 month production average.
However, the OPEC and non-OPEC countries meeting in Vienna in June care about Saudi Arabia's production for the next 6 months (July through December). If Saudi Arabia looks like it has committed to producing at a certain level in agreement with the United States, Saudi Arabia will lose leverage.
