OPEC inches towards oil output deal ahead of key meeting

Jun 22, 2018, 05:40
OPEC inches towards oil output deal ahead of key meeting

The U.S. has reimposed sanctions, but it doesn't want its consumers to pay the price for that at the pump.

Oil prices surged almost 75 percent, touching $80 a barrel, after OPEC and allies agreed to cut production in late 2016.

Oil demand has been rising faster than expected, pushing prices higher despite a big increase in US oil output.

Analysts expect the group will consider an increase of somewhere around 1 million barrels a day. In reality, because many countries that have cut the deepest can't increase production, that would probably translate to just 600,000 barrels a day of crude flowing back on to the market.

"I'm confident that at the end of the day reason will prevail", Saudi Energy Minister Khalid Al-Falih told reporters in Vienna after a succession of meetings.

Russia, which is not a part of OPEC but is the world's biggest oil producer, is also pushing to loosen supply controls introduced to prop up prices in 2017. Their proposal would share out a quota increase of 1 million barrels a day between all members of the group. Iran does at least "understand the necessity to reduce cuts" and has agreed to discuss the matter, Oman's Oil Minister Mohammed Al Rumhy said earlier in the day.

Several other OPEC members, including Venezuela and Iraq, are also against major changes to the pact as they are unable to immediately boost production. That surge prompted the US president to complain on Twitter that the cartel was artificially inflating prices.

U.S. West Texas Intermediate crude for August delivery, the new front month, fell 17 cents to $65.54 a barrel, and was down 68 cents from the July contract's expiry on Wednesday at $66.22. Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the global nuclear agreement. OPEC, he said, "is not an organization to receive the instruction from President Trump and follow it". German carmaker Daimler cut its earnings forecast late on Wednesday, saying tariffs on cars sent from the United States to China would hurt Mercedes-Benz auto sales.

OPEC takes its decisions by unanimity, so if Iran were to wield its veto Saudi Arabia would be left only with the option of assembling a coalition of willing countries to bypass Tehran's opposition.

"That would be a good target to work with", Al-Falih said on the eve of an OPEC summit in Vienna, Austria.

With assistance from Annmarie Hordern, Manus Cranny, Nayla Razzouk, Salma El Wardany, Laura Hurst, Julian Lee, Elena Mazneva, Francois de Beaupuy and Golnar Motevalli.