OPEC MULLING INCREASE OF UP TO 600,000 BPD

The proposed increase in oil production is much less than the 1.5 million bpd proposed by Russia

Opec members are discussing a compromise agreement that would see an oil production increase of between 300,000 and 600,000 barrels per day over the next few months, according to people briefed on the talks.

While Iran said on Sunday it’s opposed to any increase to current quotas, officials from a number of other countries are optimistic that an agreement can be won for a relatively modest hike at this week’s meeting in Vienna, the sources said.

Brent crude erased losses, gaining as much as 85 cents to $74.29 a barrel at 9.46am in London.

The compromise output boost, if agreed, would be smaller than the 1.5 million bpd quota increase that Russia has proposed.

Opec officials are also working on putting the co-operation between the cartel, Russia and other oil producers – the socalled Opec-plus 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 co-operation 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, another sceptic about the need for an increase, to back higher production in the second half of the year.

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.

After two years of squeezing output to drain a global glut, prices have rallied and inventories are closer to typical levels, sparking debate on the direction of policy in the second half of the year.

Russia, under pressure from domestic oil companies keen to develop new fields, has said the total increase should be as much as 1.5 million barrels.

A quota increase of that size shared among all members wouldn’t deliver a commensurate boost in production because several countries, including Venezuela, where economic crisis is slowly destroying the oil industry, are unable to raise output.

An increase of 300,000 bpd to 600,000 bpd – above the current Opec-plus production of about 32 million bpd – would be a real increase in production from those countries with spare