Published: Sun, June 24, 2018
Money | By Wilma Wheeler

Iran signals compromise for modest rise in OPEC oil output

Iran signals compromise for modest rise in OPEC oil output

Any production increase would help offset a decline in output by Venezuela, an OPEC member consumed by economic and political crisis, and the prospect of reduced exports from Iran - OPEC's third-biggest producer - now that the U.S.is in the process of re-imposing sanctions over that country's nuclear program.

The Organization of the Petroleum Exporting Countries is meeting on Friday to decide output policy amid calls from top consumers such as the United States, China and India to cool down oil prices and support the world economy by producing more crude.

Oil prices rose in early Asian trading on Wednesday, supported by a drop in USA commercial crude inventories reported by the American Petroleum Institute (API).

Iran is particularly vocal about its objections as it braces for the impact of fresh USA sanctions on its oil exports after President Donald Trump quit the global nuclear agreement.

On Tuesday, Iranian Oil Minister Bijan Zanganeh told reporters that he would leave Vienna on Friday before OPEC holds talks with non-OPEC producers the next day.

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

Scott Sheffield, executive chairman of Pioneer Natural Resource Co (PXD.N) said OPEC should boost output by roughly 1 million bpd over time to keep global crude supply and demand in balance as production dips elsewhere.

After a meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel chose to fully comply with its existing production ceiling. That prompted Trump to call on OPEC to cut production, tweeting in April and again this month that "OPEC is at it again" by allowing oil prices to rise.

Some investors were expecting more from OPEC, and U.S. crude futures spiked 3.5% to $67.80.

He said he thinks $70 per barrel would be a "very good" oil price.

While Saudi Arabia is pushing to lift the cap, Iran would prefer to take advantage of high prices ahead of the imposition of United States sanctions in November.

Prince Abdulaziz bin Salman Al Saud says the kingdom is prepared to do whatever it takes to avoid global oil supply shortages.

For OPEC, over-compliance with its oil supply-cutting deal is a nice problem to have. "Hope OPEC will increase output substantially".

Looming large over markets, however, were meetings scheduled on June 22-23 in Vienna for the Organization of the Petroleum Exporting Countries and other big producers, including Russian Federation.

Front-month USA crude futures extended their rally, trading as much as $1.39 a barrel above the second month contract.

"The real responsibility for the current oil price hike lies with the USA president himself", Zanganeh told the audience.

"There is going to be a sales lull that will keep these barrels trapped and the widening of the spread that we see will persist and get worse before it gets better", said John Kilduff, partner at Again Capital LLC in NY. He also said the US oil output boom would slow due to pipeline shortages in the next two years.

Like this: