Update: so much for any drop in the price after the Saudi production boost report: the market appears far more focused on the news of a potential sharp drop in Iran exports, and as a result the price of WTI has spiked above $70 for the first time n a month.
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Just hours after the US Energy Secretary Rick Perry told reporters that deal between OPEC and Non-OPEC countries may "not be enough" to relieve supply constraint stress in global oil markets, Saudi Arabia has reportedly decided to take matters into its own hands, and according to Bloomberg the kingdom is planning to pump a "record amount of crude in July, embarking on one of its biggest-ever export surges to cool down oil prices."
Effectively Saudi Arabia is doing unilaterally what last week's OPEC meeting failed to collectively by assuring the world of a major production boost, thereby pushing the price of oil lower, as Trump had been demanding.
According to Bloomberg reports, Saudi state oil giant Aramco plans to boost production next month to about 10.8 million barrels a day, the people said, in the process surpassing the previous record high of 10.72 million barrels a day in November 2016.
The move, as Bloomberg adds illustrates the "unprecedented response to the pressure U.S. President Donald Trump has put on OPEC to supply more oil."
The monthly increase would mark an unprecedented monthly surge in output from a nation which in May told OPEC it pumped 10.03 million barrels a day.
The actual production level in July will depend on demand for exports and domestic consumption, so could end up ranging between 10.6 million and 11 million barrels a day, the people said. Domestic oil use surges during summer months as the kingdom burns crude to generate electricity for air conditioning.
The Saudis have been under growing pressure from Trump to pump more oil ahead of the U.S. midterm elections in November, and to lower prices which have threatened to undo the economic boost from Trump's tax cuts.
To be sure, Trump has publicly complained about OPEC policy and rising oil prices on Twitter. Moreover, U.S. lawmakers have resurrected the "No Oil Producing and Exporting Cartels Act," or NOPEC, which proposes making the group subject to the Sherman antitrust law that was used more than a century ago to break up the oil empire of John Rockefeller.
"Looks like OPEC is at it again," Trump tweeted in mid-April. Then after last week's meeting Trump lashed out again: "Oil prices are artificially Very High! No good and will not be accepted!"
Coincidentally, as Bloomberg broke the news about the imminent Saudi boost, a State Department official said that the U.S. is pushing allies to cut oil imports from Iran to zero by Nov. 4, adding that the U.S. isn’t granting waivers on Iranian oil imports ban.
If fully complied, the actions may remove as much as 1 million barrels of oil from the market.
The irony, however, is that the confluence of these two reports, first sent the price of oil sliding on the Saudi report, followed by a modest boost on the Iran news, thereby assuring more angry tweets from the president.