Oil Firm as Conciliatory Saudis Reaffirm Commitment to Boosting Output

by Ship & Bunker News Team
Monday October 22, 2018

With Saudi Arabia suddenly in a conciliatory mood as the global community finds far-fetched its explanation for the death of dissident Saudi journalist Jamal Khashoggi, traders on Monday were confident enough to give crude a modest price boost: Brent rose 5 cents to $79.83 per barrel, while West Texas Intermediate also settled up 5 cents to $69.17.

Specifically, Khalid al-Falih, energy minister for the Saudis, told Russia's TASS news agency that his kingdom won't unleash a 1973-style oil embargo on Western consumers (when it retaliated against countries supporting Israel during that year's Yom Kippur war) but instead is focused on raising output to compensate for losses in Iran and other countries.

Falih added that the Saudis would soon raise output to 11 million barrels per day (bpd) from the current 10.7 million, and that it was possible to increase further to 12 million bpd.

As for the international furor over Khashoggi's death in the Saudi embassy in Turkey that the kingdom insists was the result of a fistfight gone awry, Falih said, "This incident will pass; 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."

Abhishek Kumar, senior energy analyst at Interfax Energy, echoed the sentiments of many in the analytical community by stating, "It is still not a foregone conclusion that the kingdom's production increase will be enough to compensate for the potential output loss from Iran and Venezuela."

A similarly wary Tamas Varga, strategist for PVM Oil Associates, added, "The big unknown is how much Iranian oil will be off the market, and we'll know in about a month's time - then we'll have a clearer picture of what to expect for the first quarter of next year."

Falih seemed to acknowledge as much when, after being asked if the prospect of $100 per barrel oil could be avoided, he replied, "I cannot give you a guarantee, because I cannot predict what will happen to other suppliers."

Temporarily forgotten on Monday, it seems, is the evidence of U.S. stockpile builds and other indications the world's crude producing nations are more likely to put the global market into a surplus next year, which caused JBC Energy to state in a report that if Iran's output stabilizes at a relatively paltry 900,000 bpd, "one can make the strong case that the peak bullish impact of Iran is in fact already behind us."