OPEC agrees modest hike in oil supply after Saudi and Iran compromise

VIENNA, (Reuters) - OPEC agreed yesterday on a modest increase in oil production from next month after its leader Saudi Arabia persuaded archrival Iran to cooperate, following calls from major consumers to curb rising fuel costs. But the agreement failed to announce a clear target for the output increase, leaving traders guessing how much more OPEC will actually pump. Oil prices rose by $1.85 to $74.90 a barrel.

U.S. President Donald Trump was among those wondering how much more oil OPEC will deliver. “Hope OPEC will increase output substantially. Need to keep prices down!” Trump wrote on Twitter after OPEC announced its decision.

The United States, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth.

The Organization of the Petroleum Exporting Countries said in a statement that it would raise supply by returning to 100 percent compliance with previously agreed output cuts, but gave no concrete figures.

Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 percent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas.

By avoiding setting individual country targets, the deal appears to give Saudi Arabia the leeway to produce more than its official OPEC target and fill the gap left by those like Venezuela who cannot pump enough to meet their official allocation.

Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.

Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.

However, Saudi Energy Minister Khalid al-Falih convinced his Iranian peer Bijan Zanganeh to support the increase just hours before yesterday’s OPEC meeting.