Saudi Arabia: Deal can be done this week to boost oil supply

Alicia Cross
June 23, 2018

The countries of the OPEC cartel agreed on Friday to pump 1 million barrels more crude oil per day, a move that should help contain the recent rise in global energy prices.

Logo of Organization of the Petroleoum Exporting Countries is seen at OPEC's headquarters in Vienna.

Russian Federation has proposed OPEC and non-OPEC raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped rebalance the market in the past 18 months and lifted oil to $75 per barrel.

High volume oil consumers like India seem to be heading for some relief, with crude oil prices falling sharply on Thursday as major oil exporters indicated that a consensus on increasing crude oil production was near.

The Saudi oil minister said in an interview with CNNMoney on Thursday that there could be "a deficit in the second half of this year of 1.6 to 1.8 million barrels".

Iraq's energy minister said it was clear that Opec and its allies would change course after 18 months of production curbs, in an effort to rebalance crude supply and demand. The institution agreed production caps in November 2016 targeting 32.5m barrels per day following a crash in global oil prices.

Benchmark Brent crude LCOc1 was unchanged at $75.08 a barrel by 1037 GMT.

Iranian publication Seda quoted sources as saying Zanganeh told the meeting he would not accept an output increase because doing so would pave the way to an Iranian oil embargo.

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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 are cooking something", Zangeneh told reporters after meeting the Saudi energy minister.

Oxford Economics suggests the actual increase in production will be around 600,000 barrels per day as not all countries can increase output.

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

The correction in prices have been a continuing trend since May 23, when prices breached the $80 mark after the announcement of new United States sanctions on Iran and ongoing supply disruptions in Libya and Venezuela.

Riyadh has said it is ready "to mitigate the effects of any supply shortages" from USA sanctions on Iran's oil.

"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".

The statement did not say how exactly the production increase would be split between OPEC and non-OPEC nations. She said OPEC ministers had acted as "their own worst enemies" by warning this week of a potential shortage of around 2 million barrels per day in the second half of 2018. In September, we will review the situation in the market and decide the future course, ' he said.

Other reports by Free-Prsite

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