OPEC and allies reach agreement to share oil production increase

OPEC strikes deal to boost oil production | TheHill

The countries of the OPEC oil cartel agreed Friday to effectively increase their combined production by nearly 1 million barrels a day, though questions remain over some of the members' ability to do so amid domestic trouble and sanctions.

Global oil prices rose Friday by over one percent on the day as analysts expected any OPEC+ crude output increase to fall short of the original target.

However, Saudi Energy Minister Khalid al-Falih convinced his Iranian peer Bijan Zanganeh to support the increase just hours before Friday's OPEC meeting.

August WTI Crude Oil settled at $68.58, up $3.73 or +5.75% and September Brent Crude Oil finished the week at $75.32, up $2.24 or +3.07%.

Iran was the primary hold-out, though its anger over the USA factor is widely shared by the other non-GCC OPEC members like Venezuela.

On Saturday, ministers of the cartel met with major producers outside OPEC, including Russia, Mexico and Kazakhstan, in Vienna.

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.

OPEC and its allies have since a year ago been participating in a pact to cut output by 1.8 million bpd.

Russian Energy Minister Alexander Novak said on Saturday he was happy with the decision even though he had previously pushed OPEC and non-OPEC to raise output by as much as 1.5 million bpd. According to Kazempour, Venezuela had said its output would partially recover in the next three to four months, another reason why other producers should not step in to compensate.

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Iran was also understood to have demanded the final OPEC statement to include a formal OPEC condemnation of United States sanctions being imposed on OPEC member countries, which Tehran clearly did not get.

"It will be enough for now but not enough for the fourth quarter to address a decline in Iranian and Venezuelan exports", said Gary Ross, head of global oil analytics at S&P Global.

Speaking to the Islamic Republic of Iran Broadcasting (IRIB), Khatibi, who is also an expert in the oil industry, said Iran insisted that no change should be made in the production ceiling and quota for OPEC members.

McTeague said OPEC's hike in supplies will be stymied by some countries' inability to ramp up production.

US President Donald Trump, hoping for lower pump prices ahead of November's mid-term elections, has been among the loudest critics of OPEC's supply cut pact, piling pressure on key ally Riyadh to boost output. "Need to keep prices down!"

"We are not going to allow a shortage to materialize to the point where markets will be squeezed and consumers will be hurt", he said.

USA shale oil production has helped offset some of OPEC's cutbacks since 2016.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018. Zanganeh has said the U.S. president is to blame for high prices because of his unilateral withdrawal from the worldwide nuclear agreement and the imposition of fresh sanctions that could significantly curb Iran's crude exports.

An OPEC statement said: "The Conference noted that the oil market situation has further improved over the past six months, with the global economy remaining strong, oil demand relatively robust, albeit with some uncertainties, and with the market rebalancing evidently continuing".

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