White House walks back Trump tweet on Saudi output hike

The White House has scrambled to clarify US president Donald Trump's tweet indicating Riyadh had pledged to boost Saudi oil output by 2mn b/d, which, not surprisingly, rattled global oil markets.

Exceptionally, the White House issued a formal statement noting that King Salman bin Abdel-Aziz merely had affirmed the kingdom's intention to maintain 2mn b/d of spare capacity during the call, indirectly correcting Trump's misinterpretation that the Kingdom agreed to raise actual oil production.

Trump announced on Twitter yesterday that "because of the turmoil & disfunction (sic) in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference...Prices to (sic) high! He has agreed!"

But that appears to have been such a misunderstanding that both the White House and official Saudi Press Agency issued clarifications.

"In response to the President's assessment of a deficit in the oil market, King Salman affirmed that the Kingdom maintains a two million barrel per day spare capacity, which it will prudently use if and when necessary to ensure market balance and stability, and in coordination with its producer partners, to respond to any eventuality," the White House said.

That statement was largely in line with the Saudi account of the conversation, released by the official Saudi Press Agency yesterday.

Riyadh said the two leaders "stressed the need to make efforts to maintain the stability of oil markets, the growth of the global economy, and the efforts of producing countries to compensate for any potential shortage of supplies."

Global oil markets have been upended by the US insistence earlier this week that foreign buyers of Iranian crude eliminate their imports from that country - about 2.39mn b/d in May - by November as Washington enforces sanctions on Tehran. The background briefing by a State Department official on 26 June sparked a surge in oil futures prices, something Washington has been at pains to avoid. The timing coincides with the midterm congressional election in the US, with Republicans defending their control of both the House of Representatives and the Senate.

In yet another possible effort at damage control, the State Department will hold a follow-up briefing on Iran sanctions tomorrow morning, but this time on camera and on the record, by policy planning chief Brian Hook. Clearly last week's background briefing had the unintended consequence of fueling prices higher.

The rise in US retail gasoline prices is bringing back oil markets into the focus of US politicians, including Trump, who in a televised interview today again blamed Opec for allegedly manipulating oil prices. "They better stop it because we are protecting those countries, many of those countries," Trump said.

Opec and other major oil producing countries on 23 June reached an agreement to raise oil production in the second half of the year to offset expected losses from sanctions-hit Iran and from free-falling Venezuelan production.

Saudi Arabia already was preparing to boost its production to 10.8mn b/d in July, an increase of nearly 800,000 b/d from May, as assessed by Argus. That target level already would have marked record high Saudi output. An agreement to boost output by 2mn b/d would, theoretically, take Saudi production to 12mn b/d - using up all of its spare capacity.