President Trump said in a tweet on Saturday that Saudi Arabia agreed to boost oil production by 2 million barrels per day (mb/d), a claim that surely came as news to the Saudis.
Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference…Prices to high! He has agreed!
The tightening of the oil market has pushed up prices, which is always a concern for U.S. politicians wary of catching heat from their constituents.
The decision by OPEC+ in June to hike production by 1 mb/d looks increasingly inadequate in dealing with the growing number of supply outages around the world. It’s no surprise that Trump wants more Saudi oil on the market, but he likely misunderstood what the Saudis told him.
Saudi Arabia was producing 10 mb/d in May and recent reports suggest they might add as much as 800,000 bpd to 1 mb/d in July, a massive increase in such a short period of time.
But it’s a far cry from the 2 mb/d that Trump thinks Saudi Arabia will add. That would translate into overall production of around 12 mb/d, which is probably unrealistic for a few reasons.
First, there are technical questions about how far and how fast Saudi Arabia can push its oil fields. Can they ramp up to 12 mb/d? Probably, but there is not a lot of historical evidence to go on. Also, they probably can’t do it immediately, it would take time, perhaps more than a year.
The second – and more important – reason why Saudi Arabia won’t comply with Trump’s wishes to add another 2 mb/d onto the market is that they don’t want to.
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