Saudi Arabia says that it can meet all requests to satisfy June orders from countries that had to stop buying U.S. sanctioned Iranian crude.
Moreover, Saudi oil production is likely in June to remain below the ceiling it agreed with OPEC and its allies late last year. That agreement expires at the end of June.
Customers asking to buy Saudi oil for shipment in June include former buyers of Iranian oil, But such requests are moderate in number, according to sources in the region.
Saudi Arabia pumped about 9.8 million barrels a day in March and April and has an OPEC quota of 10.311 million. The kingdom will continue to export less than 7 million barrels a day in June, sources say.
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 US 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 US blindsided Saudi Arabia by granting the waivers as it sought to damp fuel prices ahead of mid-term Congressional elections.
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 US sent an aircraft carrier strike group to the region and Iran threatened to resume uranium enrichment beyond agreed limits.
Riyadh is treading a fine line between keeping its key US 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.
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.