Oil Rallies to $74.84 Per Barrel as OPEC Agrees to Increase Output

Oil price rose sharply yesterday after the Organisation of Petroleum Exporting Countries ( OPEC) agreed a modest increase in oil production from next July.

This was sequel to recent calls from major consumers to pump more oil into the international market to help reduce the price of crude and avoid a supply shortage.

Brent crude oil futures rose $1.79, or 2.5 per cent, to $74.84 per barrel by 12:42 p.m. ET. U.S. West Texas Intermediate (WTI) crude futures were up $2.99, or 4.6 per cent, at $68.53 a barrel.

Although the 24- member organisation at its meeting in Vienna, Austria yesterday, approved a one million barrel boost to daily output, the actual increase will be smaller than that because some nations are incapable of pumping more crude, Bloomberg quoted Nigerian Minister of State for Petroleum, Dr. Ibe Kachikwu to have said.

OPEC resolved to increase oil production from next month after its leader Saudi Arabia persuaded arch-rival Iran to cooperate, following calls from major consumers to help reduce the price of crude and avoid a supply shortage.

Major oil consumers- – the United States, China and India had urged Vienna-based OPEC to release more supply to prevent an oil deficit that would hurt the global economy, Reuters reported.

The organisation said in a statement that it would go back to 100 per cent compliance with previously agreed output cuts but gave no concrete figures.

Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 per cent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas.

The deal, the Reuters reported, gave a tacit green light to Saudi Arabia to produce more than currently allowed by OPEC as the 14-nation organisation avoided setting individual country targets.

Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.