OPEC agreed on Friday to raise oil production by around 1 mln barrels per day from July for the group and its allies, an OPEC source said. The output gain is nominal.
The real increase will be smaller because several countries that recently under produced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap, OPEC sources have said, according to Reuters.
The countries of the OPEC oil cartel convened in a meeting in Vienna on Friday, to discuss increasing their production by about 1 million barrels a day at a meeting Friday that could influence the cost of energy globally in coming months.
The group’s largest producer, Saudi Arabia, is seen to be open to higher production but Iran has been hesitant as US sanctions are hindering its ability to export. US President Donald Trump has been calling publicly for the cartel to help lower prices.
Saudi Oil Minister Khalid al-Falih said Friday that an OPEC committee ahead of the official meeting had agreed “to recommend releasing the equivalent of 1 million barrels or thereabout to the market” as reported by the Associated Press.
A production increase would help undo a 1.2 million barrel cut OPEC agreed on in late 2016 that has since helped push up the price of oil by almost 50 percent. Non-OPEC countries like Russia had agreed to cut 600,000 barrels a day of their own production as part of the deal in 2016, and they will discuss with OPEC on Saturday whether to participate in a production increase.
While Iran has voiced skepticism in recent days about the prospect of a production increase, on Friday it sounded more flexible on the idea. Its oil minister, Bijan Namdar Zanganeh, told reporters that, “Some of the countries are against any increase, and ask them. I am not representative of them.”
He said he thinks $70 per barrel would be a “very good” oil price. The international benchmark, Brent, was at $74.19 a barrel on Friday. The production limits by the Organization of the Petroleum Exporting Countries and Russia have helped increase oil prices, with the benchmark US crude contract hitting its highest level in more than three years in May.
Some analysts note that while Trump has blamed OPEC, his policies have also helped increase the cost of oil by, for example, limiting exports from Iran. Russia may be happy to pump more oil and settle for prices in the $60s, according to Tamar Essner, chief energy analyst for Nasdaq.
“This is not going to be a decision just based on market analysis and supply and demand,” said Daniel Yergin, the vice chairman of research firm IHS Markit and author of several books on the energy industry. “The geopolitical factors will play in a lot.”
Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher U.S. policy toward Iran, Saudi Arabia’s rival for influence in the region, and so will want to support Trump’s call for higher production and lower prices.
(With The Associated Press)