Oil prices climb on uncertainty over possible rise in OPEC output

22 June, 2018, 08:31 | Author: Eric Barnett
  • Crude Oil Pump

After sitting down with several counterparts, Iranian Minister Bijan Namdar Zanganeh said he was optimistic about the outcome of the OPEC meeting, a marked contrast to comments on Tuesday when he said a deal was unlikely. He echoed earlier comments from OPEC Secretary-General Mohammad Barkindo.

But oil prices have found some support from global demand, which has been increasing strongly this year.

So far there is no indication that Iran and the other members would agree to such a reallocation, although with officials holding extensive talks in the run-up to Friday's Opec meeting, further compromise could be made.

That would effectively mean a modest boost from producers such as Saudi Arabia that has been cutting more deeply than planned despite production outages in Venezuela and Libya.

Investigation by Vanguard showed that the disagreement became obvious, following Saudi Arabia's lobbying of members to support its call for increased oil supply to the market.

He said Trump had contributed to the rise in prices by imposing sanctions on OPEC members Iran and Venezuela, which will likely lead to lower exports.

At issue is OPEC's 2016 agreement with nonmembers like Russian Federation to cut production by 1.8 million bpd. The trade war could be "put on hold" again, but in case China slaps tariffs on USA oil, nearly everyone will lose in the long run.


Most of the shortfall has come from Venezuela, where an economic crisis has savaged the nation's petroleum production.

So, a larger increase agreed by Opec would require a new set of output targets.

Oil prices surged almost 75 percent, touching $80 a barrel, after OPEC and allies agreed to cut production in late 2016. That surge prompted the USA president to complain on Twitter that the cartel was artificially inflating prices.

That may seem insignificant in a global supply of 98 million barrels a day, but critically it would reverse reductions that the same countries approved in late 2016, helping push crude higher by more than 50 percent.

Trump's involvement makes it hard for Tehran to accept a compromise. A big OPEC deal- adding more than 1 million barrels - could cause prices to dip into the $2.60s or $2.70s this summer, he said. OPEC, he said, "is not an organization to receive the instruction from President Trump and follow it". "OPEC is not part of the Department of Energy of the United States".

"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".

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

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