Prices Dip Slightly on Reports Iran May Agree to Small Production Hike

Cornelia Mascio
Giugno 22, 2018

Iran signalled on Wednesday it could compromise on a small increase in OPEC oil output when the group meets this week, as Saudi Arabia scrambled to convince fellow members of the need for a larger rise in production.

Iran's oil minister, Bijan Namdar Zanganeh, questioned this week whether OPEC is united enough to reach any agreement, and said Trump had politicized the debate over oil prices.

The Organization of the Petroleum Exporting Countries (OPEC), a producer cartel de-facto led by top exporter Saudi Arabia, is meeting together with some non-OPEC members including top producer Russian Federation at its headquarters in the Austrian capital to discuss output policy. He echoed earlier comments from OPEC Secretary-General Mohammad Barkindo.

Investigation by Vanguard showed that the disagreement became obvious, following Saudi Arabia's lobbying of members to support its call for increased oil supply to the market. The paper agreement would see production increase by 1 million barrels a day to bring the group back to target. OPEC Plus are now holding back two million barrels of the market daily.

OPEC agreed on Friday on a modest increase in oil production from July after its leader Saudi Arabia persuaded arch-rival Iran to cooperate amid calls from major consumers to help reduce the price of crude and avoid a supply shortage. The South American country are facing bans and diplomatic freezes from the USA and its allies, while Iraq has production issues. However, it exports below seven million barrels daily.

Analysts had expected an increase of between 300,000 and 800,000 barrels per day, noting discord among members on whether to lift supply constraints at all.

Iran is understood to want a coded critique of the United States, which recently ended an global nuclear agreement with Iran, in the final Opec agreement on Friday. Venezuela's oil industry is collapsing due to years of mismanagement and an economic crisis.

Ecuador said OPEC and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd. But problems in Venezuela, Mexico and other nations mean the reduction in May was far higher.

If this threat turns into reality, USA crude oil-which is now in high demand in Asia due to the wide $9-a-barrel discount to the Brent Crude worldwide benchmark-will become uncompetitive. That surge prompted the USA president to complain on Twitter that the cartel was artificially inflating prices.

Brent oil prices rose 1% to 74.03 in London trading on Friday. Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the global nuclear agreement. A big OPEC deal- adding more than 1 million barrels - could cause prices to dip into the $2.60s or $2.70s this summer, he said.

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