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The leader of Saudi Arabia promised President Donald Trump that he can raise oil production if needed and the country has 2 million barrels per day of spare capacity, the White House said on Saturday, rowing back on an earlier Trump tweet that appeared to suggest the Saudis had agreed to boost output by that amount.
Trump said Saturday that he had received assurances from King Salman bin Adulaziz Al Saud that the kingdom will increase oil production, “maybe up to 2,000,000 barrels” in response to rising prices. Saudi Arabia acknowledged the call took place, but mentioned no production targets.
Oil prices have edged higher as the Trump administration has pushed allies to end all purchases of oil from Iran following the U.S. pulling out of the nuclear deal between Tehran and world powers. Prices also have risen with ongoing unrest in Venezuela and fighting in Libya over control of that country’s oil infrastructure.
Benchmark Brent crude was trading around $79 a barrel on Friday.
A gallon of regular gasoline sold on average in the U.S. for $2.85, up from $2.23 a gallon last year, according to AAA.
Trump wrote on Twitter that he had asked the king in a phone call to boost oil production “to make up the difference…Prices to (sic) high! He has agreed!”
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!
However, the White House said in a statement that the Saudi leader agreed to raise output if needed and made no mention that a specific amount was pledged.
“King Salman affirmed that the Kingdom maintains a two million barrel per day spare capacity, which it will prudently use if and when necessary to ensure market balance,” read the statement.
A source familiar with Saudi Arabia’s production plans told Reuters earlier in the week of the kingdom’s intention to increase output by 200,000 bpd this month.
Saudi Arabia — along with other Organization of Petroleum Exporting Countries (OPEC) and non-OPEC nations, including Russia — had agreed on June 22 to boost production by a combined 700,000 to 1 million barrels a day, a move that should help contain the recent rise in global energy prices. Any 2 million bpd-increase would thus be at least double market expectations.
Saudi state media reported that during the call, the Saudi king and Trump emphasized the need to preserve oil market stability and efforts of oil-producing countries to compensate for any potential shortage.
The statement reported by Saudi media did not mention any intention by Saudi Arabia to raise production by 2 million bpd. Saudi oil officials did not comment.
The source familiar with the kingdom’s plans told Reuters last week that Riyadh plans to boost output in July to 11 million bpd, the highest in its history, up from 10.8 mln in June.
Saudi Arabia has a maximum sustainable capacity of 12 million bpd, but it has never tested that level of production.
“We will be in uncharted territory. While Saudi Arabia has the capacity in theory, it takes time and money to bring these barrels online, up to one year,” said Amrita Sen of consultancy Energy Aspects.
Trump appears to be trying to “talk the market down,” said Lawrence Goldstein, who directs the Energy Policy Research Foundation. He questioned whether Trump’s words would do anything to reverse the effects on the market of declining Iranian oil production.
Trump’s aim may be to exert maximum pressure on Iran while at the same time not upsetting potential midterm voters with higher gas prices, said Antoine Halff, a Columbia University researcher and former chief oil analyst for the International Energy Agency.
“The Trump support base is probably the part of the U.S. electorate that will be the most sensitive to an increase in U.S. gasoline prices,” Halff told the Associated Press.