OPEC agrees to increase oil output to avoid deficit

22 June, 2018, 22:45 | Author: Sally Reid

Saudi Arabia urges OPEC to help consumers by boosting oil supply as opposition from arch-rival Iran shows signs of wavering.

But Iraqi Oil Minister Jabbar al-Luaibi suggested it was far from a done deal, stating that the proposal was not approved by "everybody".

As tensions mounted, the Iranian and Saudi ministers huddled for bilateral talks on Friday morning, holding up the start of the closely watched OPEC meeting.

Bailey, however, said he anticipates the level of production will likely hold, because oil giants like Saudi Arabia - the de facto leader of OPEC - don't want to see prices fall.

Iran has so far been the main barrier to a deal, with Oil Minister Bijan Zanganeh saying on Tuesday Opec should not yield to pressure from US President Donald Trump to raise output.

Khalid Al Falih, Saudi Arabia's energy minister. "We are trying to narrow the gap between the two and we hope that this afternoon reach some sort of good compromise".

Zanganeh was due to attend a ministerial committee on Thursday, two sources said.

His position appeared unchanged on Friday.

"The actual decision by OPEC and its partners - which may not actually become apparent until Saturday - is the big one traders are watching", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

The move comes amid soaring crude prices and output disruptions in several member countries, including Venezuela, Iran and Angola.

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"Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher USA policy toward Iran, Saudi Arabia's rival for influence in the region, and so will want to support Trump's call for lower prices".

Russian Federation and Saudi Arabia agreed to increase outflow by around 1.5 million barrels a day to steady the market as U.S. sanctions on Iran and political instability in Venezuela are expected to affect global production.

But that is easier said than done since much of the shortfall has come from Venezuela, where an economic crisis has savaged the nation's petroleum production.

Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.

The kingdom and its allies estimate that total cuts now amount to 2.8 million barrels a day.

The group's largest producer, Saudi Arabia, is seen to be open to higher production but Iran has been hesitant as USA sanctions are hindering its ability to export.

"While we are not in favour of prices as low as $30 per barrel, we also do not support the prevailing high price which dent our fiscal balance and undermine our development process", Mr. Pradhan added.

"If the volume of spare capacity goes down then the market gets much more vulnerable to supply shocks", said Essner, the Nasdaq analyst.

The outcome of that meeting could give oil users around the world a strong indication as to whether they face the prospect of rising prices later this year - possibly as high as $100 a barrel - or more plentiful supply that would ease the cost of gasoline and diesel.

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