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Iran Out, Saudi Arabia In: US Efforts to Replace Iran Oil Exports with Saudi's Gets Complicated

May 02, 2019

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  • Iran is out!  US sanctions on Iranian oil exports are in full effect as of today with all existing waivers for countries now expired
  • The public faces between the US and Saudi Arabia have been all smiles but there are hidden conflicts behind the facade.
  • The U.S. is pushing for a restart in a field shared by the Kingdom and Kuwait in the so-called Partitioned Neutral Zone 
  • The fields there, shuttered for 3 years in a dispute between the countries, could provide 500k barrels per day to the market
  • Saudi Arabia believes there is no need for more and trying to lobby OPEC nations around that point

 

Oil - WTI Crude Price, Year to Date 2019

oil price

Source: Bloomberg

 

  • OPEC is set to meet on May 19th in Jeddah, Saudi Arabia, when the country is expected to make its full pitch to other producers
  • The US sees the Partitioned Neutral Zone as a solution, which requires Saudi Arabia and Kuwait to resolve a dispute over said zone; the US is trying to facilitate a resolution 
  • The US is trying to convince the Saudis that a return to production of said fields is in their best interest, allowing its stock of spare capacity to remain unchanged
  • The US says the Saudis have previously pledged to hike production when needed this spring and the US says it is confident that will happen
  • The Saudis remind quietly that they have not specified exactly how much that would be...

 

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