Sunday, 22 July, 2018

Iran Walks Out As Russia, Saudis Gain Support For Oil Output Increase

Lindsey Cook | 22 June, 2018, 18:49

If all Opec members produced as much as they were allowed under the deal, Opec output would in theory rise by about 740,000 barrels per day, based on Reuters estimates of the group's production in May.

Falih, in a nod to the problems with faltering production in Venezuela, Iran, and Libya, acknowledged that "not every country" will be able to join the production increase.

Iran has so far been the main barrier to a deal, with Zanganeh saying OPEC should not yield to pressure from US President Donald Trump to raise output.

The market is now under "OPEC-Watch" with numerous major players on the sidelines until the cartel along with Russian Federation makes its decision about production rates at its meeting in Vienna on June 22-23.

Trump's involvement in pressing for OPEC to act - which in addition to his tweets include a behind-the-scenes request for a 1 million-barrel-a-day supply hike - could make it hard for Tehran to accept a compromise.

Iranian oil minister Bijan Namdar Zanganeh said as the group met Friday that "we are not here to receive instruction from President Trump and apply it and implement it".

Riyadh has said it is ready "to mitigate the effects of any supply shortages" from USA sanctions on Iran's oil. In turn, USDCAD rose to a fresh 1 year high as markets reduced rate hike bets from the Bank of Canada with OIS markets now pricing in a 53% chance of a hike in July from 60%.

The Bloomberg headline earlier says that OPEC members have come to an agreement on principle for an output increase of 1 million bpd on paper.

OPEC and non-OPEC partner countries are due to hold crunch talks in Vienna on Friday and Saturday to decide the fate of an 18-month-old supply-cut pact that has cleared a global oil glut and lifted crude prices to multi-year highs.

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"It would seem that an aggregate increase in production for OPEC+ of between 500,000 bpd and 1 million bpd is the range that is being considered", Tchilinguirian said.

"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".

"If China's import demand dries up, more than 300,000 bpd of USA crude will have to find a new destination", energy consultancy FGE said.

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

The increase was announced after ministers from the group met on Friday in Vienna.

Falih also said the real increase for OPEC and non-OPEC would be smaller than the nominal gain of 1 million bpd.

There is concern among consuming nations and some OPEC members that a shortage and rising oil prices could cripple the global economy.

"This puts Saudi Arabia in a tough position, as unanimity is needed for any accord to be reached", it added.

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