Saudi Arabia in no hurry to boost supply as US tightens noose on Iran oil exports

Opec+ is weighing the impact of the cancellation of waivers on the oil markets

Saudi energy minister Khalid Al Falih said the kingdom would consult with other producers on rebalancing the market following US pressure on Iran. Reuters

Saudi Arabia, the world’s biggest oil exporter has said it would adopt a wait and watch approach to ramping up production, amid calls from the US to boost supply following the cancellation of waivers to Iran’s oil clients.

“[There is] no need to raise oil output immediately. Saudi Arabia remains focused on balancing global oil markets,” Saudi energy minister Khalid Al Falih told a finance conference in Riyadh on Wednesday.

Saudi Arabia as well as the UAE were referred to in a White House statement revoking waivers granted to Iran’s oil buyers on Monday. The White House said the two nations had agreed to boost supply as it looked to clamp down on Iran’s exports, driving them to zero with immediate effect.

The loss of approximately a million barrels per day of Iranian crude could be compensated in kind by an increase in supply from Saudi Arabia, the de-facto head of Opec, the UAE as well as output from the US.

In the immediate aftermath of the cancellation of waivers, Riyadh issued a communique that it would "coordinate with fellow oil producers to ensure adequate supplies are available to consumers while ensuring the global oil market does not go out of balance".

However, Saudi Arabia has looked to tread cautiously following the US' request, mainly because it remains unclear how Washington seeks to enforce its Iran policy.

Tehran’s biggest buyer, China, has refused to comply with US guidelines and analysts have suggested that Iran could still smuggle at least  300,000 bpd to export markets over land via neighbouring countries.

Prior to US sanctions over Iran in November 2018, Saudi Arabia and allies upped output only to see the White House grant waivers, which eventually led to a bearish market by year-end.

The UAE’s energy minister Suhail Al Mazrouei said earlier this month that Opec+, as the alliance undertaking market correction is known, had “misjudged” the impact of US sanctions against Iran on the oil markets last year.