OPEC and allies agree to share oil production increase

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OPEC Works Toward Deal as Saudis Propose Plan for Higher Output - Article

23 June, 2018

Zanganeh has said the 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.

In an interview with Bloomberg Hossein Kazempour Ardebili confirmed yesterday that the three OPEC founders would oppose the proposal: "If the Kingdom of Saudi Arabia and Russian Federation want to increase production this requires unanimity".

As the Organisation of Petroleum-Exporting Countries (OPEC) faces a rift within, ministers of its member countries have gathered in Vienna, the group's headquarters, to discuss the issue of global oil output.

Reuters reported that the reinstitution of usa sanctions in November could cut Iran's oil output of almost 4 million barrels a day by a third.

High volume oil consumers like India seem to be heading for some relief, with crude oil prices falling sharply on Thursday as major oil exporters indicated that a consensus on increasing crude oil production was near.

"We need to continue to tread carefully; none of us want to see the return of the kind of volatility that allows pessimism to return to the markets", Suhail Mohamed Al Mazrouei, the UAE energy minister and president of the Opec conference, said.

Brent crude rose $1.86, or 2.5 percent, to $74.91 a barrel by 1:34 p.m. EDT.

Iranian oil minister Bijan Zanganeh said in an exclusive interview on Wednesday that previously agreed limits on production remain the best way to balance global oil supply, demand and prices. But some cartel members will struggle to increase their output.

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That would effectively mean a modest boost from producers such as Saudi Arabia that have been cutting more deeply than planned despite production outages in Venezuela and Libya. "OPEC is not part of the Department of Energy of the United States", RFE/RL cited the minister as saying.

"They may have to add production to make up for the unrest in Venezuela and the Iranian sanctions that are ahead of us, as well as the effect in China", he said.

Ecuador said OPEC and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd.

OPEC and its allies exceeded their pledged 1.8 million barrels a day of production cuts by 47 percent last month.

While OPEC's largest producer, Saudi Arabia, is seen to be open to higher production, Iran has been hesitant because of its trouble to increase output and tensions with the U.S. President Donald Trump has been calling publicly for the cartel to help lower prices.

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.

An increase in Opec production will be particularly helpful for the VLCC market, which is on track for the worst year in history due to severe vessel over-supply, according to Amit Mehrotra of Deutsche Bank.

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

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