OPEC aims for modest increase in oil output

KUWAIT/VIENNA • OPEC is discussing a relatively modest production increase before its meeting in Vienna this week, an attempt to bridge the gap between Russia’s push for a big rise and Iran’s insistence that no change is needed.

While a compromise may be necessary to overcome vocal opposition from Tehran, Baghdad and Caracas, it could mean the resulting supply boost is smaller than oil traders — or indeed the U.S. President Donald Trump — had been anticipating.

Crude prices rallied in London on Monday after two weeks of losses, trading above $US74 a barrel.

Members of the Organization of Petroleum Exporting Countries are discussing an agreement that delivers 300,000 to 600,000 barrels a day of additional oil supply to global markets over the next few months, according to people briefed on the talks.

If agreed, that would be smaller than the 1.5 millionbarrel-a-day quota increase that Russia has proposed.

“People probably feared 1.5 million barrels a day,” but the current talk indicates a smaller increase, said Torbjorn Kjus, chief oil analyst at DNB ASA. “It’s going to be the most interesting meeting for a while.”

The push by some OPEC members to boost production reflects both internal and external pressures.

Within the group, Venezuela’s oil output has collapsed to the lowest since the 1950s due to industry mismanagement, and Iran’s petroleum exports are subject to renewed U.S. sanctions.

These twin crises could remove 1.5 million barrels a day from the market by next year, while also giving those two nations an incentive to block any efforts to fill the gap.

From outside, Trump is attacking the cartel on Twitter for artificially inflating prices and lobbying hard behind the scenes for a significant production increase.

Russia, by far the largest non-member to join OPEC’S cuts agreement, has said it would be happy with lower crude prices and appears keen to start up new fields.

In the run-up to meetings of OPEC and its allies in Vienna this week, several nations have floated plans for production increases, but no consensus has emerged for what’s likely to be a fractious meeting.

OPEC officials are also working on putting the cooperation between the cartel, Russia and other oil producers — the so-called OPEC+ group currently comprising 24 nations — on a permanent footing. That would be a major diplomatic breakthrough for Riyadh and Moscow after just two years of cooperation on oil policy.

The prospect of binding Russia, the world’s largest exporter after Saudi Arabia, more closely to OPEC might help persuade Iran and Venezuela to back higher production in the second half of the year.