The Trump administration’s bid to drive Iranian oil exports to “zero” is proving beneficial to Saudi Arabia, putting the U.S. ally on a stronger footing for a showdown across the Persian Gulf.
Saudi Crown Prince Mohammed bin Salman’s government is planning to increase oil production to a record high of almost 11 million barrels a day by July to replace Iranian crude likely to be lost as a result of U.S. sanctions, people close to the Saudi oil ministry said, according to The Wall Street Journal.
“Saudi Arabia is ‘an essential linchpin’ of the Trump administration’s strategy against Iran,” said Helima Croft, managing director at RBC Capital Markets. “A better economy is a big win for MBS,” she said, using a common nickname for the Crown Prince.
U.S. pressure has already begun rippling through Iran. The National Iranian Oil Co. has ordered affiliates to be ready for a reduction in oil production of 200,000 to 500,000 barrels a day, Iranian oil contractors said.
At the same time, Saudi oil production is likely to hit 10.8 million to 10.9 million barrels a day in July, up from around 10.6 million in June and 10.03 million in May, according to the people close to the oil ministry.
Croft also said Prince Mohammed would most likely use at least some revenue from oil sales to continue pursuing initiatives aimed at developing new industries not reliant on oil and avoiding “politically unpopular austerity measures.” A stronger Saudi economy would likewise remove some of the fiscal pressure as the kingdom fights rebels in Yemen who they maintain are supplied by Iran.
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