Saudi Arabia plans to meet all requests for oil purchases it has received for June, notably from countries that had to stop buying Iranian crude because of recent U.S. sanctions, Bloomberg reported.
The world’s biggest oil exporter has received moderate requests from customers for shipments next month, including from former buyers of Iran’s oil, according to a Arabian Gulf person familiar with Saudi plans, who asked not to be identified because the matter is confidential.
Saudi oil production for June is expected to remain below the kingdom’s ceiling under an agreement between the Organization of Petroleum Exporting Countries and its allies limiting output until the end of next month, the person said. Saudi Arabia pumped about 9.8 million barrels a day in March and April and has an OPEC quota of 10.311 million.
Riyadh will continue to export less than 7 million barrels a day in June, the person said.
OPEC+, as the producer coalition is known, will respond to any actual shortage once it materializes by increasing supply, the person said. Saudi Energy Minister Khalid Al-Falih said last month that he sees no need to take immediate action in the oil market, signaling a cautious response to the U.S. decision to tighten sanctions on Iran.
Washington’s May 2 announcement that it wouldn’t renew waivers permitting imports of Iranian oil marked a reversal from last November. At that time, the U.S. blindsided Saudi Arabia by granting the waivers as it sought to damp fuel prices ahead of mid-term Congressional elections, Bloomberg noted.
Crude prices have been bolstered as exports from several suppliers including Iran face disruption. Geopolitical tensions in the oil-rich Gulf have also intensified as the U.S. sent an aircraft carrier strike group to the region and Iran threatened to resume uranium enrichment beyond agreed limits.
Saudi Arabia is treading a fine line between keeping its key U.S. ally happy while preserving OPEC+ unity. To prevent a possible spike in crude, Washington expects Saudi Arabia and other OPEC members to help make up for anticipated losses in Iranian exports, Bloomberg writes.
At the same time, Saudi Arabia is leading OPEC+ in cutting supplies to try to buttress crude and avert a glut. If the kingdom boosts production sharply to offset missing Iranian barrels, it will have a hard time persuading others to limit output. OPEC, including Iran, plans to meet in June to decide whether to extend their production curbs into the second half of the year.