The recent decision by President Trump to end all Iran sanction waivers by May was welcomed in Saudi Arabia, but the Kingdom indicated it would respond cautiously with decisions on oil production.
“President Donald J. Trump has decided not to reissue Significant Reduction Exceptions (SREs) when they expire in early May,” a White House readout said. “This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue. The United States, Saudi Arabia, and the United Arab Emirates, three of the world’s great energy producers, along with our friends and allies, are committed to ensuring that global oil markets remain adequately supplied. We have agreed to take timely action to assure that global demand is met as all Iranian oil is removed from the market.”
Trump Tweeted on Monday that “Saudi Arabia and others in OPEC will more than make up the Oil Flow difference in our now Full Sanctions on Iranian Oil.”
Saudi Arabia’s foreign minister on Tuesday welcomed the decisions, saying it was a necessary step to halt Tehran’s “destabilizing” policy in the region, Reuters reports.
But Saudi energy minister Khalid Al-Falih was more cautious in his closely-watched response to the move from the Trump White House. Last year, when Iran sanctions were announced, Saudi Arabia ramped up oil production in response to ensure the market was well-supplied. Then, the Trump Administration walked back the severity of the sanctions with the SREs for certain buyers of Iranian crude.
The combination of the SREs and Saudi Arabia’s pledge to increase supply to the market contributed to a global crude glut that put significant downward pressure on oil prices, which have only recently started to recover.
“The trauma of having surged output in the third quarter of 2018 to protect the world from the effects of U.S. sanctions on Iran only to have the rug pulled out from under them lingers,” Amrita Sen, chief oil analyst at Energy Aspects Ltd., said in a note to clients, according to Bloomberg.
Al-Falih said in a statement that the Kingdom would “ensure a well-balanced and stable” market but stopped short of promising significant supply increases, an indication that the Kingdom would be patient and react to facts and actions from the Trump Administration this time around.
“In the next few weeks, the kingdom will be consulting closely with other producing countries and key oil consuming nations to ensure a well-balanced and stable oil market,” Al-Falih said.
Bloomberg reports that the pledge from Al-Falih “had been agreed in advance of the U.S. announcement — oil officials had traveled to Washington in the past two weeks for face-to-face discussions with American diplomats,” citing a person briefed on the meetings.
