Top consumers calling on OPEC to boost output
KUWAIT CITY, July 30, (KUNA): In the wake of Saudi Arabia’s decision to suspend oil shipments through the Red Sea’s strategic Bab-el-Mandeb strait, the repercussions of the move on oil prices remain subtle, according to an analyst. Countries bearing the brunt of the Saudis’ decision to halt shipments through Bab-el-Mandeb strait, where four to five million barrels of oil pass through the waterway each day, will now have to rely on commercial stocks until maritime transit through the significant shipping route is safe, oil expert Mohammad Al-Shatti told KUNA on Monday.
The security of oil supply has taken precedence among the international community in recent weeks, Al-Shatti explained, with the United States and other top oil consumers calling on OPEC to boost production in order to ensure stability in global markets.
On a fresh deal OPEC members struck last month to raise oil production, Al-Shatti said that it has proven immensely beneficial to the global market, emphasizing that the security of oil supply hinges on safe maritime transit routes. Meanwhile, the analyst clarified that any attacks on oil shipments require responsive and urgent action, citing the UN’s Convention on the Law of the Sea, which states that all ships and aircrafts enjoy the right of unimpeded transit passage.
He went on to say that the global oil market is at a perilous juncture given the decline in oil production in some regions of the world, in addition to the soaring demand for oil, which prompted OPEC to boost oil output by 1 million barrels per day. “If the security of oil supply is threatened in any way, then prices will begin to spiral out of control,” Al-Shatti said, pointing out that as the world’s biggest oil exporter, Saudi Arabia churns out between six to seven and a half million barrels of oil per day.
Saudi Energy Minister Khalid Al-Faleh said last week that the kingdom is “temporarily halting” all oil shipments through Bab Al-Mandeb strait after two of its crude vessels were attacked by the Iran-allied Houthi group. The upheaval is expected to have a minimal effect on Kuwaiti oil shipments, where 90 percent of the Gulf state’s crude exports go to southeastern Asia, a Kuwaiti oil official has said.