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Oil is rallying after OPEC reportedly strikes a deal to raise production

22 June, 2018, 22:43 | Author: Lawrence Cooper
  • High oil prices hurting fiscal balance, says Pradhan

Iranian OIl Minister Bijan Zanganeh's exit from a meeting in Vienna on June 21 threw into question whether Russian Federation and the OPEC oil cartel will be able to reach agreement on their proposed 1 million-barrel-a-day production increase, the first such rise since the group agreed to freeze production in 2016.

"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.

The cartel would be the biggest beneficiary of possible Chinese tariffs on USA oil imports, as these could help it regain market share, OPEC sources and industry officials tell Reuters.

"Iran rejected a potential compromise, saying it won't support even a small increase in oil production".

"We were teased with an increase of about 1.8 million barrels (per day) at one point, and we ended up getting about 600,000", Kilduff said. The measure has helped rebalance the market in the past 18 months and lifted oil to around $75 per barrel from as low as $27 in 2016.

Crude Oil: OPEC tentatively agree to raise production by 1mln bpd, which will represent a real production increase of roughly 600k bpd.

Fawibe said: "If OPEC increases its production by 1.5million barrels per day, there will be a slump in the price, especially now that we are going to winter."He urged the federal government to proactively address the situation in the oil-producing region to enable the country to boost production, which stood around 2.25 million b/d earlier this year".

If this threat turns into reality, USA crude oil-which is now in high demand in Asia due to the wide $9-a-barrel discount to the Brent Crude worldwide benchmark-will become uncompetitive.

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Iran's oil minister walked out of a key meeting with OPEC peers on Thursday, as a rift deepened with regional rival Saudi over its push to ramp up the cartel's oil output.

He said that there are "many, many options. and we will settle to one of those options". Brent, the worldwide benchmark, was up 1.85% to $74.80 a barrel.

More important to Saudi Arabia than extra petrodollars is containing Iran, its arch-nemesis.

Venezuela, in the throes of an economic crisis, is also opposed to easing the cartel's output curbs, as are several other countries, including Iraq and Nigeria, who would struggle to immediately increase production. Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the global nuclear agreement. 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.

"OPEC is listening to consumers", Bob Dudley, the chief executive of BP Plc, said on the sidelines of the OPEC conference in Vienna.

"If the volume of spare capacity goes down then the market gets much more vulnerable to supply shocks", said Essner, the Nasdaq analyst.

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.

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