KUWAIT The United States is pressing Saudi Arabia to boost oil output to fill a likely supply gap arising from sanctions on Iran, Gulf oil officials said, adding that an increase in production is unlikely to be needed before July. Saudi Arabia is the only producer with spare capacity and oil importers will rely on Riyadh to fill the gap should Iranian output drop.
Saudi Arabia has made clear it will only raise output if it sees additional demand for crude and does not want its oil policy implicated in efforts to disrupt Iran's atomic programme which the West says aims to develop a nuclear weapon.
"There were talks held between Saudi and the U.S. and the U.S. asked if Saudi could be accommodating once the sanctions take effect in July. And the Saudi response was that it was ready to meet demand in the market if required, but would not like to take part in the politics," one Gulf official said.
The official was speaking at a gathering of energy ministers from producer and consumer nations at the International Energy Forum (IEF) in Kuwait.
A U.S. official declined to comment on the talks, saying only, "We consult regularly with the Saudis on a range of bilateral and global energy issues."
Attending the conference, Saudi Oil Minister Ali al-Naimi gave reassurances on Tuesday to importing nations on Riyadh's willingness to supply more oil if the need arises.
A European Union embargo on Iranian crude takes effect on July 1. U.S. and European financial sanctions have made it more difficult for other importing nations to process payments for Iranian crude.
Oil prices have risen sharply this year to $125 a barrel for Brent crude. Oil traders are keen to know the likely timing of any Saudi supply increase to counter the expected decline from Iran. "There will not be any surprises in Saudi production over the coming few months, we are yet to see what demand in April will be. But generally production will stay up or down 200,000 barrels per day from the current 9.8 (million bpd)," the Gulf official said. "The situation is still not clear, by July there will be a clearer picture," another Gulf source said.
In Washington, Democratic lawmakers this election year have been urging the Obama administration to tap the country's emergency reserves to bring down petroleum prices.
"If Iran won't stop saber rattling, and the Saudis won't eliminate Iran's leverage by producing more oil, then it's time to release oil from the Strategic Petroleum Reserve to send these countries a message that the U.S. economy won't be held hostage for months," said Edward Markey, the top Democrat on the House Natural Resources Committee.
Already running close to record highs of about 10 million bpd, Saudi says it has the capacity to reach 11.4-11.8 million very quickly and could bring on another 700,000 bpd in 90 days to reach full capacity of 12.5 million bpd.