OPEC reaches deal to modestly raise oil output from July

24 June, 2018, 15:01 | Author: Regina Lloyd
  • Crude Oil

Iranian Minister of Petroleum Bijan Zangeneh and Saudi counterpart Khalid al-Falih have held talks in Vienna just before the OPEC group met to decide on policy, the Shana news service reported.

Moscow and Riyadh have argued that OPEC should heed calls from major oil-consuming countries like China, India, and the United States to lift their 2016 production freeze to rein in rising oil prices.

Saudi Arabia is pushing for a hike in oil output, putting the fate of an 18-month-old supply-cut deal between OPEC members and allied countries credited with clearing a global oil glut and lifting crude prices in jeopardy. Assuming that the main production continues, that will continue to drive inventories down, we think that that would be, you know, probably too short of a supply situation, that we can not allow to happen.

In practice, the cut has approached 2.8 million bpd, delegates and ministers say, because of involuntary declines in countries including Venezuela and Angola, as well as voluntary reductions by Saudi Arabia.

Oil prices rose in early Asian trading on Wednesday, supported by a drop in USA commercial crude inventories reported by the American Petroleum Institute (API).

OPEC, he said, "is not an organization to receive the instruction from President Trump and follow it". He said a recent rise in oil prices was mainly the fault of Washington, which imposed new sanctions on OPEC members Iran and Venezuela.




Zanganeh was speaking ahead of a highly-anticipated meeting in Vienna, Austria, on Friday where OPEC members could move to ease the production cuts.

Saudi Arabia and non-OPEC Russia have said a production increase of about 1 million barrels per day (bpd.) or around 1 per cent of global supply had become a near-consensus proposal for the group and its allies.

Stocks of crude oil and refined products are now below their five-year averages and expected to continue falling in the second half of 2018 and through 2019. US President Donald Trump has been calling publicly for the cartel to help lower prices.

Sources told Reuters on Thursday that Iran wants any increase to be justified on demand conditions and not dictated by outside external pressure, as even some of Saudi Arabia's traditional allies have accused the kingdom of bending too far to appease us wishes. Trump has been lobbying OPEC to help lower prices. "A host of geopolitical events around the world could really stoke prices higher". He also said the USA oil output boom would slow due to pipeline shortages in the next two years.

OPEC in theory needs the agreement of all members to clinch a deal but has in the past agreed production pacts without Iran, which has criticized the idea of raising supply as it faces export-crippling US sanctions. Among those who failed to do so are Russian Federation, responsible for more than half of the non-Opec cuts, and Kazakhstan, which increased output to the highest level since the start of the curbs. "If China's import demand dries up, more than 300,000 bpd of U.S. crude will have to find a new destination", energy consultancy FGE said.

Jack Allardyce, research analyst at Cantor Fitzgerald Europe, expects OPEC to compromise and agree a fairly modest increase of 300,000-600,000 barrels per day in production, equivalent to about 0.5 percent of world production.

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