Oil prices up nearly 3 pct as OPEC agrees to raise output

Jeannie Matthews
June 24, 2018

The world faces likely lower oil exports from Iran, Opec's third-biggest producer, after US President Donald Trump pulled out of a 2015 nuclear accord with a vow to renew sanctions against Tehran. 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.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

"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.

"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.

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

There is concern that a shortage and rising prices could cripple the global economy.

Tensions spiked last night when Iranian Oil Minister Bijan Zangeneh stormed out of the Joint Monitoring Committee Meeting and told journalists that it was not a good meeting and a deal was "unlikely".

Essner is betting that the Vienna meeting will yield an agreement to boost production by 500,000 to 800,000 barrels a day, far below the 1.5 million barrel figure floated recently by Russia's oil minister, Alexander Novak.

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OPEC oil ministers gather to discuss production level
Non-OPEC members including Russia , Oman and Mexico also agreed to cut 558,000 bpd off their production to stabilise the market. Venezuela experiences severe production outage, and already lost 350,000 barrels / day this year with the decline accelerating.

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The intensive negotiations between ministers in Vienna this week are the culmination of a process that has whipsawed oil markets for weeks.

While Saudi Arabia, a member of the OPEC, and Russian Federation, a non-member, have spoken in favour of lifting production after a tight output control sustaining over 18 months, Iran and other members of the bloc have resisted it and even threatened to veto the proposal made by Riyadh. U.S. light crude was 80 cents higher at $66.34.

Venezuela likewise has railed against U.S. sanctions that have hampered state oil company PDVSA's ability to finance its operations.

Iran had balked at the request because it faces sanctions after President Donald Trump ripped up an worldwide nuclear agreement.

Mr Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the global nuclear agreement and the imposition of fresh sanctions that could significantly curb Iran's crude exports.

The correction in prices have been a continuing trend since May 23, when prices breached the $80 mark after the announcement of new U.S. sanctions on Iran and ongoing supply disruptions in Libya and Venezuela. The minister said that amounts to "a little bit less than 1 million barrels".

No nation should be allowed to boost output in order to take market share away from another member.

He went on to say that according to International Energy Agency reports, there is no imbalance in the global oil market, however, next year's situation is another issue.

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