Cartel agrees to ramp up output
Adding up to 700,000 barrels a day designed to moderate prices.
The Organization of the Petroleum Exporting Countries reached an agreement in Vienna on Friday that would effectively pump an additional 600,000 to 700,000 barrels a day onto world markets in a bid to moderate prices while generating more revenue.
The deal to increase production marks a compromise hammered out by Saudi oil minister Khalid al-Falih and Iranian oil minister Bijan Namdar Zanganeh, who had stormed out of a meeting Thursday evening accusing the cartel members of being influenced by President Donald Trump rather than by supply and demand.
The new agreement would technically allow for an increase of 1 million barrels a day, but many of the countries are unable to boost production from current levels for technical as well as political reasons.
Production could rise further by the end of the year.
The new production will help offset a drop in crude supplies from Venezuela, where political turmoil has hurt operations at the state-owned oil company Petroleos de Venezuela. It could also help balance markets once U.S. sanctions on Iran take hold in November.
Iran’s oil minister has bristled at what he called American efforts to influence OPEC’s output decision. Not only will U.S. sanctions remove an estimated half-million barrels a day of Iranian oil from the market, but in recent months, Trump had twice tweeted that OPEC was not producing enough oil and was letting prices rise too high.
“The President is very much here in spirit if not person,” Robert McNally, president of the consulting firm Rapidan Energy Group, said in an email from Vienna. “Iran insists that any increase not appear to be due to President Trump’s pressure campaign. But they also want OPEC to blame high oil prices partly on Trump’s sanctions.”
Nigeria’s oil minister Emmanuel Ibe Kachikwu said that OPEC would attempt to keep prices in the mid60s in dollars, but that Trump was not the only consideration.
“When the price of oil is below $50 you’re never going to have a Tweet that says, ‘Oh we did a fantastic job,’ ” he said. “It’s American first but again it’s Nigeria first and it’s all the other countries first too.”
Iran’s oil ministry had tweeted earlier in the week that Trump really wanted to increase prices “to justify US shale oil production but to escape American
public pressure due to high prices, he attacks OPEC.”
OPEC has been working closely with non-OPEC oil producers, most notably Russia, which had joined output cuts by OPEC 18 months ago.
However, political unrest in Venezuela and Libya had reduced OPEC production more than anticipated, driving the price of the international benchmark Brent crude to $80 a barrel.
In talks in Moscow last week between Russian and Saudi leaders, Russian officials said they wanted to return to full production.
OPEC leaders and nonOPEC oil exporting countries will meet Saturday to discuss the OPEC production agreement.
Barclays Research said in a note to investors that it expects Saudi Arabia to raise output by 300,000 barrels a day, Russia by 100,000 barrels a day and the United Arab Emirates and Kuwait by 200,000 barrels a day.
“To correct for the disruptions in Venezuela, other declines, and possibly to get ahead of the inevitable disruption in Iran, OPEC has agreed to raise output,” Barclays said.