US President Donald Trump has claimed that he has gained assurances from King Salman of Saudi Arabia to increase production by up to two million barrels per day (bpd).
Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction 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!
— Donald J. Trump (@realDonaldTrump) June 30, 2018
In a June 30 Tweet, he said:
“I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference.”
While the Saudi Arabian government later confirmed that a phone conversation took place, it did not state the existence of any production goals. A statement from the White House also took a more conservative position, saying:
“King Salman affirmed that the Kingdom maintains a two million barrel per day spare capacity, which it will prudently use if and when necessary to ensure market balance.”
While the Kingdom could feasibly increase production from its current 10 million bpd to 12 million bpd, such a level is yet untested and may take considerable time and money to achieve. This would take it far beyond its historic high of 10.72 million bpd. It would also put the country in violation of its current OPEC quota, including a recent deal to increase output by a million bpd.
The Kingdom has consistently warned about the dangers of letting the oil market overheat, however, and may well intervene to keep oil prices at sustainable levels. While high crude prices are most keenly reflected at the petrol pumps, it also influences other refined products, such as the oils from Mobil UK stockists and some industrial solvents.