Saudi has no intention of repeating 1973 oil embargo, Al-Falih says

Crude oil futures slipped after Saudi oil minister, Khalid al Falih, said his country had no intention of repeating the 1973 oil embargo.

In an interview with Russia's TASS, Al-Falih said: "For decades we used our oil policy as a responsible economic tool and isolated it from politics.

"So let's hope that the world would deal with the political crisis, including the one with a Saudi citizen in Turkey, with wisdom."

The Saudi official's remarks came close on the heels of calls from some US politicians for sanctions to be imposed on Riyadh in the wake of the killing of journalist Jamal Khashoggi, which in turn had prompted speculation that the Kingdom might respond by restricting its supplies of oil.

Indeed, shortly after news of Khashoggi's killing broke, followed by widespread condemnation from around the globe, reports had surfaced of veiled threats from some Saudi officials.

In his interview, Al-Falih also called attention to the fast-dwindling spare capacity among the world's main oil producers. Since April, Al-Falih said, Saudi oil output had increased from between 9.8-9.9m barrels a day to 10.7m b/d, alongside higher production in Russia and the UAE.

Nevertheless, he cautioned that: "We have relatively limited spare capacities and we are using a significant part of them. For now we in Saudi Arabia have 1.3 mln bpd of spare capacity, UAE has assured me they have over 200,000 bpd remaining. But we do not know what is going to happen in other countries.

"We know Kazakhstan plans to increase production with Kashagan and Tengizoilfields., Brasil is expecting to increase production. And US shale could bring additional volume of oil. So it may happen that we may not need to use spare capacities. But if you have other countries to decline in addition to the full application of Iran sanctions, then we will be pulling all spare capacities."

On a related note, also on Monday, International Energy Agency chief, Fatih Birol, downplayed the risk that Saudi might respond to any sanctions linked to the killing of Khashoggi by reducing its supplies.

Speaking on the sidelines of an LNG conference in Nagoya, Japan, according to Reuters, Birol said: "I appeal to all the producers and consumers to have common sense in the very difficult months we are entering."

Commenting on recent events, in a research note published on 19 October, analysts at Barclays Research said recent Saudi "messaging" might create upwards pressure on the level of crude oil prices needed by Riyadh in order to balance its annual budgets.

The hit to investor sentiment and the added strain on the public finances "would obviously present another upside risk to oil prices next year, which we expect will be on a downward path and average $72/b," they said.

Ironically, it might also see the US government dial-back on the pressure it applies on Tehran via sanctions, Barclays added.

"The US needs Saudi Arabia’s extra oil to implement its Iran policy and Saudi Arabia needs US policy to check Iran to enhance Saudi Arabia's security", Barclays said.

"If it became clear for even a moment that Saudi Arabia is no longer willing to uphold its end of the bargain, it could pressure US policymakers to not tighten restrictions on imports of Iranian oil, in our view."