"Falling production from Venezuela and an expected decline in supply from Iran after United States sanctions have fueled speculation of tighter global supply". This is more than what markets are geared up to balance, at this moment. We are already on the brink of the 80s.
Shortly after, the White House backtracked on Trump's statement, saying that Riyadh is ready for measures aimed at stabilizing the oil market.
He added, "We will prove that the USA claim to stop exportation of Iran's oil is an illusion". Both the administration and the Saudis later clarified the dialogue between the two sides, explaining that Saudi Arabia stated it has 2 Mbd of extra capacity to add global markets when necessary. The destruction of two more storage tanks will probably have a long-term effect on exports.
Meanwhile, Russia has also ramped up its output by about 100,000 barrels a day. It wanted the Opec to "do more".
India, the biggest buyer of Iranian oil after China, already asked refiners on Thursday to prepare for a "drastic reduction or zero" of imports of Iranian oil in order to protect its exposure to the United States financial system. "Obviously we've got a market that is stressed from a standpoint of supply", Perry told reporters.
"The OPEC Monopoly must remember that gas prices are up & they are doing little to help", Trump tweeted.
Iran possesses the second-largest gas reserves on the planet after Russian Federation and the fourth-largest oil supply, while Saudi Arabia is the world's biggest oil exporter.
"If Trump continues to believe that OPEC are not doing enough, we would not rule out an SPR (Strategic Petroleum Reserve) release from the USA, or possibly even export restrictions on petroleum products", ING said in a note.
Riyadh is also under vast pressure from several ends. "But for political reasons they need to react to Trump's demands". The global benchmark traded at a US$6.11 premium to WTI for the same month. And act it did. While June saw Iran export over two million BPD, we could see a massive shock to the crude market if the USA manages to reduce exports to zero by 4 November. The 12 OPEC members with supply reduction targets increased output by 680,000 bpd compared to May.
How this plan fits into the Opec deal remains to be seen.
The impact on the tanker trade remains unclear as oil buyers could turn to regular sources such as Saudi Arabia for more barrels, or look further afield at long distance sources such as the US. The OPEC quota in this agreement is 1.2 mln barrels. And this may carry long-term consequences for Opec as a group.