Economy

Saudi Arabia agrees to boost oil production

Saudi Arabia agrees to boost oil production

Non-OPEC member Russian Federation on June 23 also backed the effort, capping a week of tense diplomacy for the bloc that averted a damaging rift between arch foes Iran and Saudi Arabia.

Donald Trump has asked Saudi Arabia to drastically increase its oil production, citing "turmoil and dysfunction" in Iran and Venezuela.

The rise in cost has come during the summer months in the USA, which usually lead to increased demand for oil, pushing up the price of gasoline up even higher in a midterm election year.

Trump told King Salman bin Abdulaziz Al Saud that the oil market could use a boost in production when the two men spoke on Friday, the White House said.

They also discussed "efforts by the oil producing countries to compensate for any potential shortage in supplies", it added.

The statement reported by Saudi media did not mention any intention by Saudi Arabia to raise production by 2 million bpd. The agency didn't say the leaders agreed or make any reference to 2 million barrels.

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The telephonic call between Trump and King Salman on Friday assumes significance in view of the increasing global oil prices, and USA asking countries to stop purchasing oil from Iran, which is a major supplier of oil to countries across the globe including India and China.

USA officials are pressing allies in Europe, Asia and the Middle East to adhere to the sanctions once they are re-imposed, with the aim of pressuring Iran into negotiating a new agreement. When Trump withdrew and reimposed sanctions, that meant Iranian exports would come under pressure.

Trump implied on Twitter that he had asked the king in a phone call to increase oil production in hopes of greater supply bringing costs down in the United States, writing 'Prices [are too] high!'

There was no immediate comment from Saudi authorities.

The State Department has said it expects the "vast majority" of countries will comply with the USA request.

On June 27, US Ambassador to the United Nations Nikki Haley, who was on a three-day visit to India, told Prime Minister Narendra Modi that it was imperative for India to cut its dependence on Iran for oil.

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Trump's warning last week about buying oil from Iran threw doubt and confusion into the energy market. In the end, both sides were able to save face.

"Saudis are used to U.S. requests for oil", Halff said.

"I guess the Saudis want to give the confidence to Trump to go very hardcore on Iran", tweeted the oil market's most vocal bull, commodities hedge-fund manager Pierre Andurand.

"If this trend, what the Russians and the Saudis have offered, I think it will lead to an implosion of the OPEC as an worldwide trade institution", Cherkaoui added.

Iran's Supreme Leader Ayatollah Ali Khamenei on Saturday accused Washington of trying to turn Iranians against their government.

Iran's rial currency has lost up to 40 per cent of its value since last month, when Trump pulled out of the nuclear deal.

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"Putting aside the fact that Saudi Arabia has no such capacity to bolster its crude output, this demand [by Trump] could be inferred as an order for the kingdom to walk out of OPEC", Iran's OPEC governor, Hossein Kazempour Ardebili was quoted as saying by the Iranian Oil Ministry website SHANA on Saturday.