Saudi Struggles For Gulf Oil Producers' Support Ahead Of OPEC Meeting
- Author: Wendy Palmer Jun 23, 2018,
Jun 23, 2018, 23:36
The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after Saudi Arabia persuaded Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.
Members of the cartel emerged from a summit on Friday with an agreement to boost crude oil production.
"The run-up to this OPEC meeting is fraught with uncertainty with Iran from the onset adopting a very entrenched opposition to any supply increase", Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told Reuters Global Oil Forum.
Saudi Oil Minister Khalid al-Falih said an OPEC committee agreed "to recommend releasing the equivalent of 1 million barrels or thereabout to the market".
Mohammed Barkindo, Opec secretary general.
The brewing tensions between the world's two largest economies comes ahead of Friday's highly anticipated meeting of oil ministers from around the globe at the Organization of the Petroleum Exporting Countries in Vienna. The talks, held as the cartel hosted an worldwide energy conference attended by hundreds of officials, executives and investors, will shape oil prices, energy stocks and currencies of petroleum-exporting countries for months to come.
While OPEC's largest producer, Saudi Arabia, was open to higher production, Iran has been hesitant because sanctions imposed by U.S. President Donald Trump are making it hard for the country to export its oil.
Saudi Arabia and its allies estimate that total cuts now amount to 2.8 million barrels.
Analysts expect the group will consider an increase of somewhere around 1 million barrels a day.
Asked whether he supports increasing production, he replied: "Some of the countries are against any increase, and ask them". He said a recent rise in oil prices was mainly the fault of Washington, which imposed new sanctions on OPEC members Iran and Venezuela.
But a decision to increase output could be taken with Iran refusing to sign up, as has happened before in OPEC.
India is Iran's biggest oil client after China. But the Iranian compromise would do nothing to roll back the additional 610,000 bpd supply reduction resulting from the collapse in Venezuela's oil industry, nor the extra 170,000 bpd decline from Mexico's aging fields.
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. The measure has helped rebalance the market in the past 18 months and lifted oil LCOc1 to around $73 per barrel from as low as $27 in 2016.
"The US has been lobbying the Saudi leadership for months, urging an end to OPEC's voluntary cut in oil production", Brennan said, adding that US President also tweeted many times about his belief that the OPEC was keeping its prices high artificially.
Trump's involvement makes it hard for Tehran to accept a compromise.
Some analysts note that while Trump has blamed OPEC, his policies have also helped increase the cost of oil by, for example, limiting exports from Iran.