Saudi concerned about tight spare oil capacity - Mr Falih

US oil rises above $70 for first time since November 2014 on Venezuela Iran worries

"Following the US decision to withdraw from the nuclear agreement with Iran, Saudi Arabia is committed to supporting the stability of oil markets for the benefit of producers and consumers and the sustainability of the global economic growth", the official said.

The International Monetary Fund last week estimated Saudi Arabia's fiscal breakeven oil price at near $88/b, and MBS himself has said the hyped public listing of state oil company Aramco that will fund numerous Vision 2030 reforms is awaiting a higher price environment.

Kuwaiti oil minister Bakhit al-Rashidi said his country will work with OPEC and non-OPEC oil producers to limit impact of any possible shortage in supplies, state news agency KUNA reported.

OPEC's oil supply-cutting deal with non-OPEC producers such as Russian Federation has helped to clear a global oil supply glut and boost prices.

The IEA estimated that Russian Federation earned an extra $121 million/day in revenue in the first quarter of 2018 due to higher prices.

Expect no immediate change of course from Saudi Arabia, Russia and their allies in a production cut agreement, as they test consumers' tolerance for higher oil prices.

Oil prices rose more than 3% on Wednesday to 3-1/2 year highs, after U.S. President Trump abandoned a nuclear deal with Iran and announced the "highest level" of sanctions against the OPEC member. In all, the IEA estimates that OPEC has some 3.41 million b/d in spare capacity, defined as production that can be tapped within 90 days "and sustained for an extended period".

Since the Iran nuclear deal went into effect, its exports have risen to about 2.5 million bpd, from less than 1 million bpd. A majority goes to Asia, with Europe receiving about 600,000 bpd.

"By declaring. the USA will be instituting the highest level of sanctions against Iran - adding that any country that aids Iran will also be sanctioned - President Trump is clearly articulating that he has minimal desire in an alternative agreement with Iran", Khoman said. Oil prices made key gains after Trump's announcement with Brent crude rising 2.4 percent to over $76.5 a barrel and USA crude trading above $70 early Wednesday.

Trump accused OPEC last month of "artificially" boosting oil prices in a message on Twitter, the first time he has mentioned OPEC on social media.

A key US ally, Saudi Arabia welcomed Trump's decision to withdraw from the nuclear agreement. "But it should be done in a collective coordinated way and that can only happen when you start to be able to assess what would be the impact".

OPEC meets next in June, where it is widely expected to continue with the supply cuts until the end of 2018.

Beijing has opposed the US move and many Chinese companies may continue to buy Iranian crude, analysts say.

"Trade data already shows a reduction of Iranian oil supplies to Japan and South Korea, and refinery sources confirmed they had started shifting purchases to other suppliers in preparation for renewed sanctions".

"You only handle (output) when you have a semi-clear idea of what would be the potential impact".

A source in Venezuela's oil ministry told Platts on condition of anonymity last week that the government was preparing for a "worst-case scenario" of a 200,000 b/d output drop by December - although some experts say the fall could be steeper.

He also said Saudi Arabia did not expect any physical impact on the oil market from the US sanctions on Iran until the third or fourth quarter of this year.



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