US, Iran Spat Leaves Saudi and Russia to Rule the Oil Markets: Reuters

Evidence suggests that the U.S. controls the oil markets. File Image / Pixabay

As the U.S. prepares to work with countries  to help them reduce imports of Iranian crude, one news agency thinks that the possible outcome of the hostility between the Americans and the Islamic republic is something Washington would presumably frown upon: Russia and Saudi Arabia ruling the global oil market.

That was the scenario offered on Thursday by Reuters, which noted that the alliance between the two countries not only drove "policy for their own geopolitical ends" at the recent Organization of the Petroleum Exporting Countries (OPEC) summit in Vienna, but will also likely see their share of the global market rise in the foreseeable future.

Reuters reiterated recent headlines to support its case, including the announcement earlier this week by the Saudis that they will produce a record 11 million barrels per day (bpd) in July, and Russia being the only other oil producing country to boost production above its quota in June.

The news agency also quoted sources as saying that the only reason Iran reluctantly agreed to the OPEC initiative last week of boosting production was because otherwise Russia might have withdrawn from the agreement - and "Moscow is helping Iran fight to keep Syrian president Bashar al-Assad in power."

What impact the growing influence of the Saudi-Russia alliance could have on the global market was not explored, but Reuters conceded that its decision to boost production "played into the hands" of the U.S., which is hoping for lower oil prices at the pump and required support from OPEC to counteract any market tightening caused by the reinstatement of the Iran sanctions.

In fact, it could be argued that the real contender in the bid for ruling the global oil market is the U.S. under president Donald Trump, who, having effectively neutered the Iranians and paved a path for increased production (including its own output) in one fell swoop, is now aiming to help wean countries off Iranian supply.

A State Department official told Reuters, "Our focus is to work with those countries importing Iranian crude oil to get as many of them as possible down to zero by November 4; we are prepared to work with countries that are reducing their imports on a case by case basis."

Senior Trump administration officials have visited European nations this week and will soon visit the Middle East and Asia to pressure countries to reduce their oil supplies from Iran, with the hope that this force Tehran to negotiate an agreement to halt its nuclear program.

Administration officials also said they will press Saudi Arabia and other Gulf states next week to ensure there are enough global oil supplies once sanctions are reimposed; one official remarked, "We are serious about our efforts to pressure Iran to change its threatening behavior."

Eurasia Group earlier this week revealed that it believes the sanctions will remove 700,000 bpd from the market instead of the 300,000-500,000 bpd it previously predicted - which would support OPEC's decision to increase output and persuade the U.S. to boost production yet further.