Saudi Arabia has increased its oil production to the highest level since the end of 2016, in a bid to fulfill demands by US President Donald Trump to drive down the prices after they hit a three-year high.
Saudi oil supplies grew by around 500,000 barrels per day in June, reaching nearly 10.5 million bpd as the world’s top crude exporter pushed hard to make good on its promises to tame oil prices.
That’s a significant increase from just over 10 million bpd in May.
Oil prices are approaching $80 a barrel for the first time since 2014, stoking concerns among major consumers, particularly in the auto-dependent US.
Trump said in late June that Saudi King Salman had agreed during a telecon with him to boost output two million bpd.
The US president thinks this would allow him to impose sanctions on the oil industries of Iran and Venezuela, two of the world’s main oil producers, without having to worry about possible price hikes and energy shortages.
The Saudi increase in production comes amid new assessments by the Organization of the Petroleum Exporting Countries (OPEC) that global oil demand will surpass 100 million bpd in 2019.
The organization expects production from the US and other non-OPEC members to increase by 2.1 million bpd next year, meaning the world will need about 32.2 million bpd from OPEC, or roughly 800,000 fewer bpd than the average in 2018.
The Saudi increase raised overall OPEC production to more than 32.3 million bpd in June, up 173,000 bpd from the previous month.
OPEC, Russia and a number of other producer nations have been working together since January 2017 to end a period of oversupply that saw oil prices drop to 12-year lows in 2016.
Having tweeted about OPEC at least 63 times since 2011, Trump has been critical of the oil-producing cartel.
Asked in an interview with Fox News in early July whether he thought there were forces that manipulated the market, Trump was quick to point fingers at OPEC.
Hossein Kazampour Ardebili, Iran’s OPEC governor, told Reuters on Thursday that Washington’s sanctions on Iranian and Venezuelan oil paved the way for the increase.
The price rise would also allow Arab countries like Saudi Arabia and the United Arab Emirates (UAE) to pay for the weapons they have bought from the US.
“The higher oil prices Trump is causing are leading to a higher energy bill in the EU, Japan, China and India, impacting their economic growth just like the tariffs imposed upon them, also enabling Saudi Arabia and the UAE to pay their arms bill to the US,” Kazempour Ardebili said.
Tehran doubts that Saudi Arabia could add enough oil to compensate possible shortfalls in case Trump tightens sanctions, the top Iranian official said.