Published: Sun, October 07, 2018
Money | By Armando Alvarado

Saudi king won’t last two weeks without US support

Saudi king won’t last two weeks without US support

After the JCPOA and the European Union agreed to relieve sanctions imposed on Iran on the condition that the country curb its nuclear capacity in July 2015, Iran's crude exports saw a slight increase in 2016, reaching 1.9 million bpd and jumped to 2.1 million bpd in 2017, according to data compiled from OPEC. That would be a record level, noted analysts at Commerzbank.

President Donald Trump says Saudi Arabia's king "might not be there for two weeks" without USA military support, further increasing his pressure on one of America's closest Mideast allies over rising oil prices.

Futures fell 2.7% in NY on Thursday for the deepest one-day dive in seven weeks.

Asked about whether Russian Federation and Saudi Arabia would raise production to ease concerns about supply and cool oil prices, Novak said that Russian Federation has already reversed all 300,000 bpd of the cuts it had pledged in the OPEC+ deal and added another 100,000-bpd production in September.

However, high crude prices, combined with widespread emerging market currency weakness, threaten growth.

He said the budget for the current fiscal year has been drawn up on the basis of an oil price of $55 a barrel, but the country's sales have averaged $70 a barrel so far.

"If Genscape is right and we do have more oil then the drop in inventories we witnessed over the past year plus is coming to an end", said Gene McGillian, manager of market research at Tradition Energy.

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Trump has vowed to squeeze Iran's oil exports down to a trickle, pushing oil prices to historical high since 2014.

Besides, Iran's budget for the current fiscal year was based on the oil price of 55 USA dollars a barrel, but the average oil price has risen to 70 dollars a barrel so far, he said.

The imbalance between bullish and bearish positions is close to a record, an analysis of regulatory and exchange data showed.

"The Saudis won't flood the market and they don't want to see it oversupplied", said Giovanni Staunovo, an analyst at UBS Group AG.

"President Trump has said he thinks the oil price is too high".

Oil prices tend to overshoot on the upside (2008 and 2011) just as they have done on the downside (1998, 2009 and 2016) before correcting. Opec and non-members agreed in June to ease production limits, in order to take some pressure off prices.

In the meantime, oil prices have risen to a level that is sending a strong signal to non-dollar consumers about the need to increase efficiency, reduce use and switch to alternative fuels.

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