Saudi Arabia has 'no intention' of 1973 oil embargo replay

Saudi Arabia's Energy Minister says Riyadh can not compensate for possible oil disappearance from global markets in the wake of USA sanctions on Iran.

The kingdom, which produces more than a tenth of global supplies, had vowed on Monday not to withhold its output as a political weapon amid the worldwide backlash over the murder of journalist Jamal Khashoggi.

"Concerns about what's going on in the stock markets and the worries about economic growth has spilled over into the oil markets", McGillian said, adding that investors will be watching closely to see if the increase in Saudi Arabia's output materializes quickly.

USA sanctions on Iranian oil begin on November 4 and Washington has said it wants to stop all of Tehran's fuel exports, but other oil producers are pumping more to fill any supply gaps. "Hopefully more countries will join", he said.

On Sunday, Saudi Arabia described the deeply shocking incident as a "huge and grave mistake", as it attempts to clear crown prince Mohammed bin Salman of any responsibility.

Peter Kiernan, lead energy analyst at the Economist Intelligence Unit in Singapore, said a Saudi cutback would be self-defeating as "Saudi Arabia would. risk losing market share to other exporters while losing its reputation as a stable actor in the market". Washington is largely depending on Saudi Arabia to fill the gap left by the loss of the Iranian barrels.

Iran's regional rival, US ally Saudi Arabia, says Riyadh has the capacity to increase output to 12 million barrels per day (bpd) from the current 10.7 million bpd.

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"If 3 million barrels per day disappears, we can not cover this volume".

Additionally, U.S. Treasury Secretary Steve Mnuchin, visiting Israel this week, said on Sunday that it will be hard for countries to receive waivers on Iran oil sanctions.

"My role as the energy minister is to implement my government's constructive and responsible role and stabilizing the world's energy markets accordingly, contributing to global economic development".

Concerns about the health of the global economy, leading to the equities selloff, are seeping into the oil market. "So we have to use oil reserves". "That policy has been consistent for many years", Falih said. He added that Riyadh had capacity to increase output to 12 million bpd and its Gulf OPEC ally, the United Arab Emirates, could add another 0.2 million bpd.

"It would be in Russia's best interests not to facilitate Iranian evasion of USA sanctions".

"As long as America targets Iran, one of the biggest crude producers, with sanctions, the volatility in the oil market will continue", Zageneh said. If US crude drops below $US65, a psychologically important figure, that could trigger further technical selling, traders said.

  • Darren Santiago