Opec agrees new output deal but oil price shows little sign of cooling down
Countries in the Opec oil cartel have agreed to a new output level that effectively increases production by almost a million barrels per day.
Theincreasewasannounced as ministers from the group met in Vienna. The production increase will partly undo a 1.2 million barrel cut Opec agreed in late 2016 that has helped push up the price of oil.
Ahead of yesterday’s meeting, Opec’s largest producer, Saudi Arabia, was seen to be open to higher production but Iran had been hesitant.
US president Donald Trump has been calling publicly for the cartel to help lower prices.
Emirati energy minister Suhail al-mazrouei said the decision was to fully comply with Opec’s self-imposed production limit, and the difference between that and current levels is “a little bit less than one million barrels”.
John Moore, senior investment manager at Brewin Dolphin Edinburgh, said: “Although Opec agreed a production increase of one million [barrels] a day, the reality is that some of its members, particularly Iran, won’t be able to meet this target. While the group insisted it would aim for 100 per cent compliance, the figure is much likely to be closer to 600,000 [barrels].
“Oil traded higher on the back of the news, which suggests the market feared a higher production increase. Many analysts remain bullish on oil in the short term.”
Non-opec countries including Russia had agreed in 2016 to participate in Opec’s effort to raise prices, cutting 600,000 barrels a day of their own production. They will discuss with Opec today on whether to increase their own production.
The production limits by Opec and Russia since 2016 have helped increase prices, with the benchmark US crude contract touching its highest level in more than three years.