Further increase oil production if Iran doesn’t reduce its supply

by Mike Elliot | Wednesday, Nov 9, 2016 | 155 views
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Dispute between Saudi Arabia and Iran surfaced again during an OPEC meeting last week. Riyadh said that Saudi Arabia will increase the output of oil steeply to further reduce the prices if Iran doesn’t reduce its supply. Time and again, both these heavyweights of OPEC have clashed and the clashes have become very frequent because of the proxy wars happening in Yemen and Syria.

Saudi Arabia had agreed to limit the production

In the past few months, Saudi Arabia has actually agreed to limit its oil production as per the new OPEC agreement. However, during an OPEC experts meeting which took place last month to work out the details of the November 30 meeting, the countries clashed again as per the OPEC sources which were present during the meeting.
During the meeting, Saudi Arabia threatened to increase the output by 11 to 12 million barrels in a day to further reduce the prices.
However, the OPEC headquarters didn’t comment on this clash.

What if Saudi Arabia actually increases the production?

Since the year 2014, Saudi Arabia has already been increasing the oil production and now produces around 10.5 to 10.7 million barrels in a day. If it further increases the production, it will only add up to the global oil glut due to which the oil prices have already turned half of what they used to be in 2014.
Iran has said that it is not willing to freeze its oil output and it should be not be a part of the new output cut agreement as their production will only start recovering after the EU sanctions are lifted.
However, an OPEC source from Gulf has said that Saudi Arabia didn’t say that it will increase the output further, but rather said that it could. The source said that Saudi Arabia only produces oil on the basis of the demand. If there is no agreement then every member could increase the production.

 

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