May 9 (UPI) -- With the United States reneging on the Iranian nuclear deal, Saudi Arabia is committed to ensuring oil market stability, its energy ministry said.
His decision on the Joint Comprehensive Plan of Action, the U.N.-backed agreement that allows Iranian oil to flow in exchange for commitments to moderate its nuclear research activity, tacitly creates supply-side shortages for the global energy market.
Crude oil prices were up close to 3 percent in early Wednesday trading.
Through its official news agency, a spokesman for the Saudi Ministry of Energy said Riyadh is committed to a stable oil market. Stability means producers and consumers benefit for the betterment of the global economy.
"He added that the kingdom would work with major producers within and outside OPEC as well as major consumers to mitigate the impact of any potential supply shortages," the coverage from the Saudi Press Agency read.
Saudi Arabia was among the few U.S. allies backing Trump's decision to walk away from an agreement that limited Iranian nuclear activity. European allies issued a statement immediately after his decision calling for U.S. restraint.
The potential snap-back of oil sanctions on Iran comes at a time when global markets have little spare capacity to work with. Saudi Arabia is the de facto leader of an effort by the Organization of Petroleum Exporting Countries to drain a surplus on the five-year average in global crude oil inventories through coordinated production declines. After years of a surplus, markets are near balance thanks in part to OPEC.
Ahead of Trump's decision, OPEC Secretary-General Mohammad Barkindo said limiting the flow of oil by walking away from the JCPOA would "no doubt send the market into disequilibrium, which is not in the interest of producers, or the interest of consumers."
An assessment of the potential consequences of Trump's decision from Moody's Analytics said the mid-term market consequences might not be as dramatic as initially expected as current sanctions on Iran's oil are less severe than during President Barack Obama's tenure.
"What made the multi-lateral sanctions enforced during the Obama era so effective was precisely the fact that they were multi-lateral, whereas the President Trump's sanctions are not," Energy Economist Chris Lafakis said in emailed comments.