Iran Infuriated by Saudi Arabia Boost in Crude Oil Production

Saudi Arabia has boosted supply to 10.70 million barrels per day in June, close to a record high, a Reuters survey found on Friday. That is up 700,000 barrels-per-day from May and means oil supply from the Organization of the Petroleum Exporting Countries will be higher in June despite a drop in Iranian exports and outages in Libya.

“The Saudi number for June will be very, very high,” an industry source who tracks the kingdom’s oil output said. “Surprisingly high.”

Iran has been infuriated by the Saudi supply boost and its scale has surprised others in OPEC, sources said.

“Our resolution does not allow any member to produce more than their quota,” Iran’s OPEC governor Hossein Kazempour Ardebili said. “If they do, it means the State Department is running OPEC.”

A survey of 35 economists and analysts forecasts Brent crude will average $72.58 a barrel in 2018, 90 cents higher than the $71.68 forecast in last month’s poll and compared with the $71.15 average so far this year.

“Supply deficit in the oil market is here to stay,” said Frank Schallenberger, head of commodity research at LBBW. “I expect OPEC to increase production by some 600,000-800,000 barrels per day till the end of the year. This won’t be enough to compensate for rising demand and declining output in countries like Iran or Venezuela.”

Oil prices rose on Friday as U.S. sanctions against Iran threatened to remove a substantial volume of crude oil from world markets at a time of rising global demand. U.S. crude rose 80 cents a barrel to $74.24 by 12:51 p.m. EDT, and earlier touched $74.43, the highest since November 26, 2014. The contract was on track to close the week up 8.2 percent, The New York Times also reported.

Benchmark Brent crude jumped $1.85 to a high of $79.70 a barrel before easing back to $79.40 a barrel. The contract was on track to close the week up 5 percent.

Vienna-based consultancy JBC Energy said the stronger the implementation and enforcement of U.S. sanctions, the higher the oil price will go. “Triple-digit oil prices are not off the table,” JBC said.

Meanwhile, crude explorers scaled back drilling in U.S. oil fields by the most in three months after the world’s top exporters agreed to raise production. U.S. working oil rigs fell by four this week to 858, according to data from Baker Hughes. It was the second straight weekly decline and the largest drop since March, Bloomberg informs.

Reuters reported on Friday that U.S. Secretary of State Mike Pompeo discussed energy security at a meeting with Saudi Arabia’s Energy Minister Khalid Al Falih on Friday in Washington. The department didn’t provide other details.

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