Saudi pledges 'measurable' oil supply boost as OPEC, Russia agree deal

Jun 24, 2018, 15:00
Saudi pledges 'measurable' oil supply boost as OPEC, Russia agree deal

However, what the deal does is effectively reduces a large upside risk to prices related to supply shocks (i.e. falling output from Iran and Venezuela) with OPEC now setting a mechanism which opens the way for other countries to increase production correspondingly.

The production increase will partly undo a 1.2 million barrel cut OPEC agreed on in late 2016 that has helped push up the price of oil.

Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 percent of global supply. Oil prices LCOc1 rose by $1.85 to $74.90 a barrel. "Need to keep prices down!" Trump wrote on Twitter after OPEC announced its decision.

Questions remain over the ability of some OPEC nations - Iran and Venezuela in particular - to increase production as they struggle with domestic turmoil and sanctions.

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.

President TrumpDonald John TrumpCNN analyst Kirsten Powers: Melania's jacket should read "Let them eat cake" CNN's Cuomo confronts Lewandowski over "womp womp" remark Sessions says Federal Bureau of Investigation agent Peter Strzok no longer has his security clearance MORE has been repeatedly pressuring OPEC to increase production.

The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories. In reality, ministers said several countries are unable to pump more so the real output boost would have been smaller - ranging from Iran's 500,000 barrel-a-day estimate up to Iraq's prediction for as much as 800,000.

The group planned to cut output by two percent, about 18 million barrels a day.

Although higher prices are better for the oil industry, Wright says there must be a balance to prevent a dramatic spike in oil prices. That means Friday's agreement will end up adding about 600,000 barrels of oil a day to the global market. The overall figure for compliance came in at 162 percent for May, up from the recent April highs of 149 percent, due to the unexpected supply disruptions out of Venezuela, Iran, Libya and Nigeria. Nevertheless, we know only too well that as long as the ayatollahs are running an ideological political system in Tehran, there will be no similar progress in matters of regional compliance. United Arab Emirates Energy Minister Suhail Al Mazrouei gave similar assurances. Hence it compromised, creating a win-win situation for both the groups within Opec.

Liberty Oilfield Services Chairman Chris Wright on how OPEC ministers agreed to raise oil production.

"We have agreed", Azevedo told reporters after a meeting with OPEC ministers and 10 non-OPEC partner countries in Vienna.

He also said OPEC could hold an extraordinary meeting before its next formal talks due on December 3 or adjust deliveries in September, when its monitoring committee meets, if global oil supply fell further because of sanctions on Iran.