On Wednesday, Saudi Arabia’s Energy minister Khalid al-Falih said that there was no need to immediately increase oil output. This followed the ending of waivers granted by the US to Iranian crude oil buyers. He added that Saudi Arabia will only respond to increase oil output if there is an increase in demand.
The Decision Not To Increase Output Based On Market Fundamentals
The minister said that his decision was based on oil market fundamentals rather than prices and that they still remain focused on stabilizing the global oil market. Speaking in Riyadh, Falih said that despite the rising of inventories as a result of sanctions on Iran and the situation in Venezuela it was not necessary to have an immediate response to increase oil output.
Last year the US granted Iranian oil buyers exemptions from sanctions but it has tightened the line by deciding not to renew them. Saudi Arabia intends to remain within its OPEC production limit as well as be intent to its customers. More so those under waivers and those that have seen their waivers withdrawn.
The minister said that they are not going to pre-empt the same and increase their output. Oil production number for May are set. It had little variations from previous months. Furthermore, crude oil allocations for June will be decided next month.
Oil Prices Have Been Increasing Since November
Since November, Oil prices have increased. This follows the announcement by the US that all waivers on imports of Iranian oil will not be renewed to put pressure on buyers to stop buying oil, from Iran. This ends up tightening global oil supply.
On Wednesday, Brent Crude futures dropped to trade at $74.18 per barrel. This followed a statement from the International Energy Agency. This indicates that markets are adequately supplied and global production is stable.