Opec agrees to increase oil production
NOMINAL AGREEMENT FOR 1M BARRELS PER DAY EXTRA OUTPUT, AL FALIH SAYS
Members agree on a ‘nominal’ production increase of 1 million barrels a day |
Opec and allies including Russia will boost oil production starting next month, offering relief to consumers after Saudi Arabia secured a lastminute deal to overcome Iran’s veto threat.
“We have an agreement” for a “nominal” production increase of 1 million barrels a day, Saudi Energy Minister Khalid Al Falih told reporters in Vienna. In reality, the accord will add about 700,000 barrels a day of oil to the market in the second half of the year because several members are unable to increase their output, said Nigeria’s Oil Minister Emmanuel Ibe Kachikwu.
The agreement is a victory for Saudi Arabia and Russia, which for a month have advocated for a production increase to alleviate high prices. It’s also a success for US President Donald Trump, who has criticised the Organisation of Petroleum Exporting Countries on Twitter for inflating the cost of fuel.
However, the final communique from the group’s meeting in Vienna left many unanswered questions about how the oil will flow to consumers. The document didn’t mention the production hike cited by Al Falih, instead pledging that the group would focus on rolling back the deeper-than-intended cuts from nations such as Venezuela, returning their curbs to the level originally agreed in 2016.
Opec and its allies exceeded their pledged 1.8 million barrel-a-day ■ production cut by 47 per cent last month, according to Russian Energy Minister Alexander Novak. That’s about 850,000 barrels a day of additional supply losses that have been largely unintentional, reflecting the collapse in Venezuela’s oil industry and long-term declines in Mexican output.
Saudi Arabia has enough spare capacity to offset those losses and keep a lid on prices, but Al Falih has acknowledged that such a move isn’t politically palatable for his fellow Opec members. The kingdom wants to preserve the hard-won unity of the group of 24 oil producers, whose cooperation ended a three-year price slump.
The salvages an agreement that was very much in doubt on Thursday evening after Iranian Oil Minister Bijan Namdar Zanganeh walked out of a meeting with fellow ministers, predicting nobody could persuade him to back an increase. “This agreement that we reached is a testimony that we care about the consuming countries,” the UAE Energy Minister Suhail Al Mazroui, who is also Opec president, told reporters. “We listen when they say that they have a concern.”
Opec will meet again today with non-members, including Russia, to ratify yesterday’s agreement.