Saudi Arabia persuades Iran and OPEC to agree increase in oil production

Jun 24, 2018, 16:33
Saudi Arabia persuades Iran and OPEC to agree increase in oil production

The price of oil jumped after the announcement, with the worldwide benchmark, Brent, gaining $1.61 to $74.66 a barrel.

Tehran had bridled at complaints on Twitter by USA president Donald Trump that the cartel was artificially inflating oil prices, which touched $80 a barrel last month. Pradhan said India does not support the prevailing high price.

And it triggered an aggressive response by Trump, who on Monday threatened to slap a 10 percent tariff on $200 billion of Chinese goods in addition to the import duties previously announced.

The goal of the 2016 agreement between OPEC and other major producers, including Russian Federation, was to slash output in order to support prices and rid markets of excess supply.

The logo of the Organization of the Petroleoum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria June 19, 2018.

He warned his fellow oil producers about rising consumer anxiety and the potential for high prices to have a negative impact on demand.

But regional rival Iran has bristled at the thought of lifting the output ceiling at a time when its oil industry is facing renewed sanctions over US President Donald Trump's decision to quit the global nuclear deal with Tehran.

Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran's output to drop by a third by the end of 2018.

"Of course we will have an agreement" at the meeting on Friday, Saudi Energy Minister Khalid Al-Falih tells reporters in his first comments since arriving in Vienna.

OPEC agreed on Friday to raise oil production by around 1 mln barrels per day from July for the group and its allies, an OPEC source said.

A production increase would help undo a 1.2 million barrel cut OPEC agreed on in late 2016 that has since helped push up the price of oil by nearly 50 percent.

The output boost agreed on Friday had been largely priced into the market and was seen as modest.

"If the volume of spare capacity goes down then the market gets much more vulnerable to supply shocks", said Essner, the Nasdaq analyst. USA light crude CLc1 was 5 cents higher at $65.12.

China, which has bought an average 330,000 barrels per day (bpd) of USA crude oil this year, is threatening to place a 25 percent tariff on various US commodity exports, including crude oil, although it is so far unclear when such a measure would come in place. The minister said that amounts to "a little bit less than 1 million barrels".

The deal looked to be in line with many analysts' forecasts.

But production has dipped more than expected thanks to factors including outages in Venezuela.

"As a group we can meet the 100 percent compliance". "It's not fair, I think, and OPEC is not a part of the Department of Energy of the United States".

OPEC is an global organization with 14 members and doesn't take orders from anyone, Zanganeh said.

"If China's import demand dries up, more than 300,000 bpd of United States crude will have to find a new destination", energy consultancy FGE said.

Shipping experts say an increase is just what the tanker market needs.

The new deal would effectively roll back the deeper-than-intended cuts from nations such as Venezuela, returning the curbs back to the level originally agreed in 2016, the delegate said.

The uncertainty heading into today's OPEC meeting has kept numerous major hedge funds on the sidelines for weeks because even with their resources, they have been unwilling to place bets on either side of the market, given the volatility usually associated with an OPEC meeting.

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