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Saudi Arabia promised to work with other OPEC nations to `mitigate` the impact in the oil market of the U.S. exit from the Iran nuclear deal.
While the statement didn’t say whether Riyadh would boost output. the new sanctions could disrupt as much as 1 million barrels a day of Iranian crude — about a quarter of its total output — opening room for Saudi Arabia to fill the gap.
`The kingdom will work with major producers and consumers within and outside OPEC to mitigate the effects of any supply shortages.` the state-run Saudi news agency reported Tuesday. citing a statement issued by an official in the energy ministry.
Treasury Secretary Steven Mnuchin downplayed the prospect of higher oil prices because of the sanctions. telling reporters that the U.S. has `had various conversations with various parties about different parties that would be willing to increase oil supply to offset this.`
`The statement from the Saudi energy ministry was a general statement of intent. It was not meant to suggest a policy shift.` said Yasser Elguindi. a strategist at Energy Aspects Ltd. in New York. `Saudi and its partners would only respond if it sees a major supply dislocation emerge. and current policy remains to reduce inventories to a more ‘normal’ level.` he wrote in a note to clients.
After the last round of sanctions were announced in 2011. Saudi Arabia boosted its production. Yet upping output now raises some risk for the OPEC and non-OPEC agreement that was put in place in 2016 and has helped to mop up a global glut. pushing prices higher. In particular. if Riyadh moves to fill any gap left by Iranian oil. it could upset relations with Moscow.
