President Trump early Saturday said via Twitter that he had spoken to King Salman bin Abdulaziz Al Saud of Saudi Arabia, and requested an increase in the country’s oil production of up to 2 million barrels of oil per day to offset turmoil in other oil-producing nations.
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
Despite ambiguous phrasing, Trump appears to believe that King Salman “agreed” to the increase in production. An agreement by an OPEC member nation to increase oil output at the request of a U.S. president would be a serious blow to that alliance of 15 oil-producing countries, which sets production quotas collectively, and has already shown fragility in recent days.
Iranian OPEC governor Hossein Kazempour Ardebili told Bloomberg that Trump’s request amounts to “calling on [Saudi Arabia] to walk out from OPEC.”
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That might be fine by Trump, who earlier this month blamed rising prices on OPEC, but has fostered close ties to Saudi Arabia.
Oil prices are too high, OPEC is at it again. Not good!
— Donald J. Trump (@realDonaldTrump) June 13, 2018
But destabilizing OPEC could throw global oil markets into even greater turmoil than they’ve seen since Trump’s election. Global oil prices have increased from between $40 and $50 per barrel in 2016, to $74 Friday amid rising global demand. Those price increases add another headwind to a global economy increasinglytroubled by the prospect of a full-scale trade war initiated by the Trump administration.
Continuing increases came despite the decision last week by OPEC and its allies to increase production by as much as 1 million barrels per day. Price increases have also been driven by Trump’s decision to withdraw from the Iran nuclear deal and reimpose trade sanctions there.
A further 2 million barrel per day increase would put Saudi Arabia’s oil output nearly at its maximum of 12 million barrels per day, as measured by the International Energy Agency. That would further cut untapped capacity in global markets, increasing the possibility of serious price volatility in the event of a shock elsewhere.
However, it is unclear how seriously to take Trump’s claim of success. According to Bloomberg, Saudi state media have confirmed a phone call between Trump and King Salman took place, but have not confirmed any agreement on production increases.