Energy Secretary Rick Perry said Thursday that he is “quite comfortable” that Saudi Arabia, Russia and other major producers will be able to boost crude oil production enough to offset rising prices caused by supply disruptions.
OPEC and Russia agreed to boost oil production a week ago to head off rising oil prices, as some key producers, such as Venezuela, Iran, and Libya, face output constraints.
“We look at this as an opportunity for OPEC members to fill this gap,” Perry said during a press conference at the World Gas Conference in Washington. “The market is going to be stressed. I am comfortable that Saudi Arabia is going to be able to increase their production. I am quite comfortable they are going to be able to meet 11 million barrels per day, that Russia will be able to increase their production. So the worldwide crude market does have some stability.”
Saudi Arabia, OPEC’s biggest producer, plans to pump up to 11 million barrels of oil per day in July, the most in its history.
But energy analysts have expressed doubt that the countries can pump enough crude to compensate for lost supply. Those concerns were amplified this week when a State Department official told reporters Tuesday that the U.S. has no plans to give waivers on sanctions to Iran’s oil customers and expects countries to stop imports by Nov. 4. The U.S. benchmark crude oil price quickly topped $70 per barrel Tuesday for the first time since May, after news spread of the administration’s zero tolerance approach.
The reimposition of sanctions on Iran is a result of President Trump’s withdrawal last month from the Iran nuclear deal, in which Tehran agreed to constrain its nuclear program in exchange for restored business and financial ties to the world economy.
The tough approach to Iran’s oil supply threatens to undermine another goal of the Trump administration: to keep gasoline prices low during summer driving season and as the midterm elections approach.
A more aggressive policy on sanctions could push oil prices past $85 a barrel by the third quarter, Frank Verrastro, an energy expert at the Center for Strategic and International Studies, told the Wall Street Journal. Global oil prices are the biggest driver of U.S. gasoline prices. Perry said he is unconcerned. He noted U.S. oil and gas companies likely will continue their “substantial production” to help keep prices low.
“We are in the summer driving period, and we have some pressures on the supply side, but I think you will see a settling down in the market,” Perry said. “I am quite comfortable the world producers of crude will be able to meet the demand that is out there. There will be some spikes in prices time to time. But as we go forward, I think the market will become calmer over time.”
