Why Saudi Arabia raised oil output before Israel’s attack on Iran

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Israel’s sudden attack on Iran threatened to disrupt oil supplies in the Middle East, which put OPEC+ Cartel’s recent decision to increase crude production in the spotlight.

The group of producers led by the Kingdom of Saudi Arabia surprised the oil market this year by tracking the revenue of the developed production even with the decrease in crude prices. This prompted speculation that the cartel was responding to the pressure of the White House to increase production before confrontation with Iran.

The United States had made several rounds of nuclear talks with Iran, but president Donald Trump also warned that he would consider military options if diplomacy failed, while Israel has publicly pushed strikes.

“I have no doubt that Trump asked the Saudis to pump more oil to deal with his three biggest problems: Iran, Russia and inflation,” said Bob McKenali, former President George W. Bush and head of the Rabidan Energy Group.

“But it is a big jump to suggest that” ask “is to make the attack possible.”

Riyadh officials were well aware that pumping more oil would satisfy Trump, who said in January that he would ask Saudi Arabia and OPEC “reduce the cost of oil.”

But analysts and merchants say that producers have their own reasons to start production cuts, regardless of geopolitical events.

Analysts said that after curbing nearly three years to pay prices up, production restrictions no longer have a significant impact. It was logical to start recovering production in the hope of restoring the market share.

Many OPEC+ members – especially Kazakhstan – were pumping over their share. This was frustrated by the Kingdom of Saudi Arabia, the largest source of the group and a real leader. It could carry the majority of restrictions, reducing its production by 2 milliliters of a day – about 2 percent of the total global show.

Despite the “maximum pressure” campaign of the United States around Iran – including Trump’s threats to restrict the country’s oil exports – his head was hesitant to pump more crude before any turmoil.

Saudi Energy Minister Prince Abdulaziz bin Salman told the people in particular that the Kingdom will not repeat its mistake for the year 2018, when Trump OPEC+ enhanced production before Tehran’s exports campaign, only to grant the American President at the time exemptions for many settlers from Iranian oil.

These moves have helped to send oil prices to a decrease in the punishment of less than $ 50 a barrel by December of that year-much less than the budget tie prices for many productive countries.

The Kingdom of Saudi Arabia remembers that the sequence of events and Abdel Aziz insisted that it will not repeat the error, as the people familiar with the matter say. The Saudi Ministry of Energy did not respond to the request for comment.

Hylema Koftt, head of the global commodity strategy at RBC Capital Markets, said if the recent production movements in the Kingdom of Saudi Arabia are in response to the United States, it may be less than Iran and more about the Kingdom’s efforts to reach American technology.

Trump praised Saudi Crown Prince Mohammed bin Salman during an American visit to Saudi Arabia last month.

“Although there is a large payment against the proposal that there is a” pump deal for Trump “, Ryad came out of Trump’s visit with great deliveries to build artificial intelligence, their civil nuclear program and their defense sector. “They definitely preferred to put the nation in Washington.”

However, the big raw jump on Friday after Israel’s attack on Iran will narrow Trump’s options in dealing with other geopolitical issues that are waving on the horizon and raising fears that it may stimulate inflation.

“OPEC+ created space for some disruption of the offer that could come from the Israeli attack on Iran. It is also correct that it could have created space for the sanctions of new Russia. But they do not create space for both.”

He said that Trump can resort to the American Strategic Petroleum Reserve, the largest emergency stock in the world, if the increase in oil prices is long or disrupting risks in the Middle East.

SPR has about 400 million barrels, much lower than its capacity of 727 million barrels, after withdrawing by former President Joe Biden to reduce the increase in prices after Russia’s full invasion of Ukraine.

Trump can also ask the Saudis to pump more oil, although this would raise difficult questions for the leaders. Analysts said that Iran is one of the original members in OPEC and the Kingdom will be careful not to disrupt the distinction between Iran and its Arab neighbors in the Gulf.

“What are the presidents doing when oil prices rise? Well, the first thing they take the phone and penetrate the Kingdom of Saudi Arabia. But RIYADH and members of OPEC+ will respond with caution,” said Rabidan McKinanie.