Opec, non-Opec pledge supply boost

OPEC strikes deal to boost oil production | TheHill

Top OPEC producer Saudi Arabia faced the challenge of convincing a handful of reluctant producers including Iran, Iraq, and Venezuela to support an output hike.

OPEC's decision to maintain 100 per cent conformity, as compared to 152 per cent observed in May, comes as a relief for India which had been raising concerns at domestic and worldwide forum over increased market volatility and high crude prices.

Iran doesn't believe its customers will get waivers from the United States government that would allow them to continue crude purchases, Oil Minister Bijan Namdar Zanganeh said in a Bloomberg television interview yesterday.

After an OPEC meeting in Vienna, United Arab Emirates Energy Minister Suhail al-Mazrouei said the cartel made a decision to fully comply with its existing production ceiling.

This comes as market participants were pricing in an increase in the global oil supply ahead of the OPEC meeting amidst calls from energy consumers to contain rising fuel costs.

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. As for Venezuela, the country's oil industry has fallen down dramatically due to internal political turbulences and also low oil prices.

Saudi Arabia said the sides had informally agreed to boost production by 1 million barrels of oil that would be divided between the producers.

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"It is very clear that Saudi Arabia, anxious about prices running higher going forward, is trying to put in place a near-term cap on prices", said Yasser Elguindi of Energy Aspects Ltd., a consultant.

But regional rival Iran has bristled at the thought of lifting the output ceiling at a time when its oil industry is facing renewed sanctions over US President Donald Trump's decision to quit the global nuclear deal with Tehran.

The green light was widely expected after energy ministers from the 14-member Organization of Petroleum Exporting Countries already agreed on Friday to raise output by one million barrels a day from July.

Brent crude was up 2.7 percent on the week, while USA crude was up 5.5 percent. Iran posits that the shortfall should remain while Saudi Arabia is eager to supplement the production. "Need to keep prices down!" It didn't detail how the production increase would be split between OPEC and non-OPEC nations, said Perez. "Ships have been scheduled, and it will be hitting the markets, I assume, in August", he said. Questions over the future of OPEC production, in light of OECD crude oil stockpiles falling below the Cartel's targeted five-year averages, now lingers over the market.

Analysts at Saxo Bank indicated Saudi Arabia wanted to ease fears of emerging markets about increased prices. While in theory that could mean extra output of 1mn bpd, in practice the figure could be lower - 600,000 bpd to 800,000 bpd - as some producers are unable to pump more. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? In particular, further declines in Libyan and Venezuelan output could easily offset increases from Saudi Arabia and Russian Federation.

Perry will meet Novak on Tuesday, in the context of the World Gas Conference that is being held in Washington, the source said.

Oil prices reacted favourably to Opec's compromise deal, with futures in the USA gaining as much as 4.9% as ministers left their meeting in Vienna.

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