Will Saudi Arabia boost oil production?

Japanese Prime Minister Shinzo Abe left shakes hands with Iranian President Hassan Rouhani

Oil prices raised this week after Washington stated it would offer no extensions or waivers to Iran's oil buyers when sanctions return in November.

US President Donald Trump (center R) holds a lunch meeting with Saudi Arabia's Crown Prince Mohammed bin Salman (center L), and members of his delegation.

The cabinet affirmed the kingdom's readiness to use its spare capacity when needed to deal with any future changes in oil supply and demand rates in coordination with other producing countries.

First Vice President Es'haq Jahangiri said on Monday that Iran is able to counter the looming USA sanctions, noting that those at the White House who think they can halt Iran's oil export are living in "illusion".

In June Saudi Arabia produced crude about 10.7 million barrels per day, which is more than 700,000 barrels more than a month ago.

"Your tweets have increased the prices by at least $10".

US crude stockpiles are forecast to have declined 5 million barrels last week, according to a Bloomberg survey ahead of government data released on Thursday.

The administration has threatened close allies such as South Korea with sanctions if they don't cut off Iranian imports by early November.

The recent strength in oil prices has in part been spurred by a USA announcement that it plans to reintroduce sanctions against Iran, OPEC's third-largest producer, from November, targeting oil exports.

"The Saudis do not have two million bpd (barrels per day) of spare capacity as it would imply production of 12 million bpd". Keeping oil price around $70 per barrel serves both economic and political objective.

At the same time, Iranian Oil Minister Bijhan Zanganeh reminded Riyadh that "any increase in the production by any member country beyond commitments stipulated in OPEC's decisions. would constitute a breach of the agreement". Now global oil prices have recovered to 2014 levels, OPEC has agreed to relax curbs and Saudi Arabia must decide whether market share is more important than price. That's led to higher prices at gasoline pumps in the U.S.as it heads toward midterm elections for Congress.

Immediately after the moot, the US Energy Secretary Rick Perry emphasised that the deal between global oil producers to boost crude output was not enough to relieve global oil markets that are stressed by supply constraints.

He added that it is "incorrect and unwise" to think that "one day all oil producing countries would export their surplus oil and Iran would be the only country that can not export its oil".

The State Department has said it expects the "vast majority" of countries will comply with the US request.

Oil prices fell by more than one per cent on Monday as investors eyed rising supplies in Saudi Arabia, while US President Donald Trump kept up the pressure on the world's top producer to make up for disruptions elsewhere.

China is the largest importer of Iranian oil with 24 percent, followed by India with 18 percent.

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