Oil rises above US$80, Saudi Arabia plans output increase

Marco Green
October 23, 2018

"There is no intention", Saudi Arabia's Minister of Energy Khalid al-Falih told TASS news agency when asked whether the kingdom could impose the 1973-style oil embargo.

"But Saudi Arabia is a very responsible country, for decades we used our oil policy as (a) responsible economic tool and isolated it from politics", al-Falih said. He added that Riyadh had capacity to increase output to 12 million bpd and Gulf OPEC ally, the United Arab Emirates, could add a further 200,000 bpd.

Saudi energy minister says his country would not be able to compensate for possible oil disappearance from global markets once the USA re-imposes its sanctions against Iran.

According to the "secret" Israeli document, carried by Hadashot TV and later reported by The Times of Israel, at an Iran-Russia-Turkey summit in Tehran in September-hosted by Iranian President Hassan Rouhani and attended by Russia's President Vladimir Putin-Iran and Russia cut a deal, under which Iran would export crude oil to Russia via the Caspian Sea, Russia would refine the oil in its refineries, and then export the products worldwide.

Brent crude futures were up 3 cents at $79.81 a barrel at 11:54 a.m. EDT, while U.S. West Texas Intermediate (WTI) was down 15 cents, or 0.2 per cent, at $68.97.

Offered at 5-day EMA earlier today, WTI is now trading below the 61.8% Fib R of August-October rally.

The discount of US front-month futures below the second-month rose to 25 cents, its highest since November 2017. The kingdom, the world's largest oil exporter, pledged to retaliate against any sanctions with "bigger measures".

Additionally, U.S. Treasury Secretary Steve Mnuchin, visiting Israel this week, said on Sunday that it will be hard for countries to receive waivers on Iran oil sanctions.

USA sanctions against Iran's oil exports are due to kick off on 4th November, with Washington pressuring governments and companies worldwide to fall in line and cut imports from the West Asian nation.

"As far as next year's supply/demand balance is concerned, it's not justified for them (Saudi Arabia) to increase production", PVM Oil Associates strategist Tamas Varga said.

While Saudi Arabia is intent on making up for lost barrels, the outlook for demand next year is deteriorating.

OPEC itself estimates demand for its crude will fall to an average of 31.8 million bpd next year, from an average 32.8 million bpd this year.

Other reports by Click Lancashire

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