Oil prices rise as OPEC meets

by Ben Pena June 23, 2018, 23:40
Oil prices rise as OPEC meets

Oil traders' attention is focused this week on Vienna, where ministers from the Organization of the Petroleum Exporting Countries and its allies must decide whether to increase their output in the second half of 2018.

Russia, which isn't a member of OPEC but has gained influence in the oil group, wants an increase of 1.5 million bpd.

But on Wednesday, Iranian Oil Minister Bijan Zanganeh had said OPEC members that had overdelivered on cuts in recent months should comply with agreed quotas.

Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of USA sanctions, have all increased market worries of a supply shortage.

As reported by Reuters, the global benchmark for oil prices Brent crude was at US$73.88 per barrel at 0144 GMT, up 1.1 per cent from their last closure.

At stake is the fate of an 18-month-old supply-cut deal between members of the Organization of the Petroleum Exporting Countries and allied countries that has cleared a global oil glut and lifted crude prices.

The president of the United States doesn't have any problem with increased oil prices since this leads to raising Shale productions, said the minister, adding, "however in public, he shows opposition and blames the OPEC while these conditions are not created by OPEC but by the U.S. administration".

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.

That would effectively mean a boost from producers such as Saudi Arabia that have voluntarily cut more deeply than planned.

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Saud Arabia's minister of energy, Khalid Al-Falih, said after Saturday's meeting that the exact allocation for each country would depend among other things on their production capacities.

OPEC and non-members including Russian Federation have been participating since January 1 previous year in a deal to cut output by 1.8 million bpd.

Bailey, however, said he anticipates the level of production will likely hold, because oil giants like Saudi Arabia - the de facto leader of OPEC - don't want to see prices fall.

Traditional Saudi allies - the United Arab Emirates, Kuwait, Oman and Bahrain - believe Saudi Arabia was too quick to respond to US calls for higher production, and have been rattled by Riyadh's close coordination with non-OPEC Russia, sources said.

Zanganeh has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 bpd.

Saudi Arabia's oil minister says officials from major crude-producing nations will discuss a proposal to increase output by about 1 million barrels per day.

Some analysts believe that Saudi Arabia needs a Brent price closer to $90 to cover its domestic spending but is feeling pressure from the United States to head off rising prices by boosting output. "These prices are creating stress throughout global economy, as it is giving pain to us in India", he said.

Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher US policy toward Iran, Saudi Arabia's rival for influence in the region.

"We are going to change this structure (of one million bpd)", he said as the meeting kicked off.

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