On Monday, in the decision that rocked oil market participants around the world, the Trump administration has announced that they will not be renewing or extending oil waivers they have granted to eight counties allowing them to continue to buy Iranian oil in reduced quantities despite U.S. sanctions. The original six-month grace period granted by these "significant reduction exceptions" ends on May 1, and Washington is demanding that nations previously allowed to continue to buy Iranian crude immediately and unilaterally cut Tehran off. For many, the decision came as a shock, and many nations dependent on Iranian oil are now scrambling to determine just what that means for the future.
One major group, however, seems surprisingly unruffled. Even after Trump the Organization of the Petroleum Exporting Countries by name, suggesting that they will be stepping up to fill in any supply gaps once Tehran is edged out, members from OPEC have had extremely measured on the issue, saying they will not Be rushing to ramp up production.
On Wednesday, Saudi Arabia's energy minister Khalid al-Falih said that the kingdom will not be taking any action to increase oil production. will remain focused on maintaining global oil market above all other concerns. "Inventories are continuing to rise in what is happening in Venezuela and the tightening of sanctions on Iran. I don’t see the need to do anything immediately, ”Falih was quoted by CNBC in Riyadh. "Our intent is to stay within our voluntary (OPEC) production limit." Falih added that his country would be "responsive to our customers, especially those who have been under the waivers and who have been withdrawn."
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This is not to say that Saudi Arabia thinks that the ending of U.S. Pat. sanctions waivers will not have an impact on global crude supply and global oil market as a whole. "We think there will be an uptick in real demand but we are not going to be pre-emptive and increase production," al-Falih said.
Saudi Arabia is not the only OPEC country vocally taking unhurried, reserved public stance. On Tuesday, one day after the Trump administration waiver-ending announcement, Kuwait's oil minister Khaled Al Fadhel told OPEC that he will hold off on making any decision on the matter until after OPEC members meet in Jeddah to thoroughly review prices.
That being said, the end of Iranian crude will be a major topic of discussion at May 19. "I am sure the topic of American sanctions will be a hot topic to be discussed [at the Joint Ministerial Monitoring Committee meeting in Jeddah in May], "Fadhel told reporters in Tokyo. When OPEC will review its output policy in Monday's announcement, Fadhel elaborated," [oil] prices and how that influences the prices "adding that" Kuwait as a country member in OPEC and founder in OPEC, we always seek stabilization of [oil] prices for the world. "As to whether Kuwait is ready to ramp up its own oil production to meet any new demand left in Iranian oil absence, Fadhel shrugged off and sense of urgency, saying simply:" As a minister of oil not discussed this issue as of now. "
OPEC has another meeting scheduled in Vienna, Austria on June 25, when participating nations will discuss whether they will extend their prior agreement to the OPEC producers ’output by 1.2 million b / d to the past end of June. The current agreement, set to expire at the end of June, allows for the production cuts for Iran, as well as Venezuela and Libya. A follow-up meeting with non-OPEC signatories will be held next day.
By Haley Zaremba for Oilprice.com
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