Crude oil futures jump to Rs 4,513 per barrel

Ivan Schwartz
June 23, 2018

A production increase would help undo a 1.2 million barrel cut agreed on in late 2016 that has since helped push up the price of oil by nearly 50 per cent. Non-OPEC member Russian Federation had also agreed to that cut and will discuss with OPEC on Saturday whatever production increase the cartel agrees on Friday. Patrick DeHaan, an analyst for GasBuddy, a gasoline price tracking service, said a middling OPEC increase - more than 600,000 barrels per day - would make it less likely that Americans will pay an average of $3.

Parviz Shahbazov, Azerbaijan's energy minister.

After an OPEC meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel chose to fully comply with its existing production ceiling. He echoed earlier comments from OPEC Secretary-General Mohammad Barkindo. Opec members Iran, Iraq, Venezuela and Algeria have opposed a relaxation of production cuts, fearing a slump in prices.

Falih said the overwhelming majority of producers had recommended raising output by 1 million bpd., gradually and on a pro-rata basis.

Saudi Arabia and its allies estimate that total cuts now amount to 2.8 million barrels. He acknowledged not all of the cartel's members could increase output, in a reference to countries such as Venezuela.

More important to Saudi Arabia than extra petrodollars is containing Iran, its arch-nemesis.

UAE's Energy Minister Suhail Mohamed Al Mazrouei arrives for the Opec meeting in Vienna.

The new deal would effectively roll back the deeper-than-intended cuts from nations such as Venezuela, returning the curbs back to the level originally agreed in 2016, the delegate said.

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Global consumption has increased by an average of 1.7 million bpd for the last three years, accelerating from an average of 1.1 million bpd in the three previous years. Iran's output is also likely to fall in the second half of this year due to new U.S. sanctions.

There's a good reason for the two countries' opposition - neither have the ability to increase their own production.

Iran had balked at the request because it faces sanctions after President Donald Trump ripped up an global nuclear agreement. I've looked at the report flying in and I think it shows that there will be a deficit in the second half of this year of 1.6 - 1.8 million barrels assuming that the main production continues.

The problem for traders and ministers trying to estimate the price needed to rebalance the market is that consumption responds to price changes with a delay of six to 18 months.

The dollar fell from an 11-month high against a basket of major currencies after the Philadelphia Federal Reserve's gauge of U.S. Mid-Atlantic business activity fell to a near 1-1/2 year low. Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the worldwide nuclear agreement.

Zanganeh has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 bpd.

Mustapha Guitouni, Algeria's energy minister.

Other reports by GizPress

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