Algeria has increased its oil output but urged fellow OPEC countries and other crude producers not to heed calls by US President Donald Trump to place more oil on the market to drive down prices.
“Algeria is adding 26,000 barrels per day to expand its crude oil output to 1.106 million barrels per day,” Algerian Energy Minister Mustapha Guitouni was quoted by state news agency APS as saying.
The announcement came after OPEC members and leading independent producers agreed to expand output by 1 million barrels per day (bpd), which put Iran at loggerheads with Saudi Arabia. The deal was a win for Russia and Saudi Arabia, which hold the most spare capacity and want to ramp up oil output.
Trump tweeted on June 30 that Saudi King Salman bin Abdulaziz Al Saud had agreed to pump “maybe” up to 2 million barrels, of oil more but the White House later backed away from the comments. Following Trump’s tweet, Riyadh announced that Saudi Arabia could increase oil production if it needed to, saying the country has 2 million bpd of spare capacity.
While oil prices have remained steady in a market with unscheduled outages from Libya, Venezuela and Canada, Algeria is concerned about a potential price drop prompted by US pressure.
Guitouni said oil-producing countries would offset output drop, which totals about 1 million bpd, with increases of 757,000 bpd from OPEC members and 200,000 bpd from non-OPEC producers.
Trump has been putting pressure on Tehran by threatening to sanction European companies that do business with Iran.
Energy consultancy FGE said in a report that Trump’s plan for Tehran was to “push Iranian exports of crude, condensate and oil products to zero.” That means oil prices are likely to remain high, analysts said, even if Saudi Arabia raises output by 1 million bpd.
“I guess the Saudis want to give the confidence to Trump to go very hardcore on Iran. Exports to zero or an attack. It will be interesting to see what the Saudis can really do and for how long. It seems that Iranian regime change is priority number one for the Saudis,” hedge fund manager Pierre Andurand was quoted by Reuters as saying.
Amrita Sen, chief oil analyst at Energy Aspects, in the same Reuters report, said: “We will be in unchartered territory. While Saudi Arabia has the capacity; in theory, it takes time and money to bring these barrels online, possibly up to one year.”
“The Saudis do not have 2 million bpd of spare capacity as it would imply production of 12 million bpd. They can likely produce a maximum of 11 million [bpd] and even that will be running their system at stress levels,” said Gary Ross, head of global oil analytics at S&P Global.
It is critical for Algeria, which depends on oil and gas earnings for much of its foreign currency reserves, that OPEC members such as Saudi Arabia and leading producers outside the cartel defend oil prices. Algeria needs oil prices to remain at more than $75 per barrel to ease its budget deficit and replenish its dwindling foreign currency reserves.
“It is not in the interest of big oil producers to see oil prices declining,” said Abdelmoumen Ould Kaddour, CEO of Algeria’s state oil company Sonatrach. “OPEC members and Russia must stick with the Algiers Accord to maintain oil prices steady.
Energy analysts said Algeria and other oil producers faced a “shift” in US policy under Trump, who seeks to defend the United States’ position as the dominant world power and impose an agenda of “liberal globalisation.”
Energy analyst Mohamed Touati said: “OPEC members had built a well-oiled machinery to defend their interests. President Trump seeks from the White House to foster division and ill-feeling among its members with the ultimate aim of destroying it.”