Following the news of US exit from the Iran nuclear deal, Saudi Arabia has announced that it will work with other OPEC nations to “mitigate” the impact.
Although the statement du the Kingdom did not clarify much as to whether Riyadh would boost output, but it must be understood that the new sanctions could disrupt as much as 1 million barrels a day of Iranian crude – about a quarter of its total output – opening room for Saudi Arabia to fill the gap.
The statement issued by the Kingdom’s energy ministry went on to say, “The kingdom will work with major producers and consumers within and outside OPEC to mitigate the effects of any supply shortages.”
Treasury Secretary Steven Mnuchin stated to the media that the US has “had various conversations with various parties about different parties that would be willing to increase oil supply to offset this.”
In an another statement, Yasser Elguindi, a strategist at Energy Aspects Ltd. in New York said about the matter, “The statement from the Saudi energy ministry was a general statement of intent. It was not meant to suggest a policy shift. Saudi and its partners would only respond if it sees a major supply dislocation emerge, and current policy remains to reduce inventories to a more ‘normal’ level.”
Saudi Arabia had earlier boosted its production following the last round of sanctions in 2011. However increasing output now raises some risk for the OPEC and non-OPEC agreement that was put in place in 2016 and has helped to mop up a global glut, pushing prices higher.
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