Published: Sun, June 24, 2018
Business | By Eloise Houston

OPEC+ eyes boosting crude output by 1mn barrels

OPEC+ eyes boosting crude output by 1mn barrels

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.

On Thursday, however, Iraqi oil minister Jabar al-Luaibi said: "We are in comprehensive talks with all ministers, especially Saudi Arabia and Iran, and we are trying to narrow that gap between the two and we hope that this afternoon we will reach some sort of good compromise".

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. 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.

By contrast, Saudi Arabia, the cartel's biggest producer and a fierce regional rival to Iran, could have the room to increase output more — and make more money — to make up for the shortfall in countries like Iran.

"We need to release supply to the market", Saudi Arabian Energy Minister Khalid al-Falih told reporters in Vienna.

Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut.

Brent oil clocked a session high of $74.21 earlier today and was last seen trading at $74.00 - up 1.25 percent on the day.

The accord is a much-needed show of unity after Iranian oil minister Bijan Namdar Zanganeh walked out of a meeting on Thursday evening, predicting that Opec wouldn't be able to convince him to back an increase.

Scott Sheffield, executive chairman of Pioneer Natural Resource Co (PXD.N) said OPEC should boost output by roughly 1 million bpd over time to keep global crude supply and demand in balance as production dips elsewhere.

The output curbs have been in place since January 2017 but Saudi Arabia, backed by non-member Russian Federation, is now pushing to raise production again in order to meet growing demand in the second half of 2018.

Asian shares hit a six-month low on Friday as tariffs and the US-China trade battle start taking their toll.

Iran's oil minister is insisting that OPEC's place is not to take instructions from U.S. President Donald Trump but is leaving open Tehran's position on an increase in production.

Falih said the overwhelming majority of producers had recommended raising output by 1 million bpd., gradually and on a pro-rata basis.

The current standoff was partially triggered by the USA, with Trump calling directly on Opec to raise output. US light crude was up $3.11, or 4.7 percent at $68.65, supported by the OPEC announcement and by an expected drawdown at the USA oil supply hub at Cushing, Oklahoma.

"You can not impose unilateral trade sanctions against two founding members of OPEC, two major oil producers. and at the same time expect the global oil market not to show tensions", he said.

Falih said the exact mechanics of any increase would be decided among all OPEC members on Friday.

But OPEC officials are increasingly confident a deal will be reached.

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