Opec aims for modest output rise to forestall Iran opposition
COMPROMISE MAY BE NECESSARY TO ALLAY CONCERNS OF TEHRAN, BAGHDAD AND CARACAS
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 US President Donald Trump — had been anticipating.
Crude prices rallied yesterday after two weeks of losses.
Members of the Organisation 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 million-barrel-aday 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.”
Opec officials are also working on putting the cooperation between the group, Russia and other oil producers — the socalled 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.
Optimistic
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.
Suhail Mohammad Faraj Al Mazrouei, UAE Minister of Energy & Industry and president of the Opec Conference for 2018, said he remains optimistic that Opec will fulfil its goal of delivering sustainable oil market stability, which it said is intended to serve the long term interests of producers, consumers and the global economy.
“Central to this optimism is the unprecedented level of cooperation and conformity from Opec and its partners to the production adjustments that were promised under the ‘declaration of cooperation,” he said.
“Stock levels have dropped significantly since the beginning of 2017 and the market is moving ever-closer to becoming rebalanced. This will undoubtedly be a key topic of discussion in our June meeting.”