OPEC rift deepens as Iran walks out of key meeting

Marcus Newton
June 24, 2018

OPEC nations and oil-producing countries not in the cartel said Saturday they have agreed to share increased oil production a day after OPEC announced it would pump more crude oil - a move that should help contain the recent rise in global energy prices.

The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC's headquarters in Vienna, Austria, June 19, 2018.

Reports said the Saudi proposal, backed by Russian Federation, would allow several hundred thousand more barrels of oil to come to the market without amending the milestone pact - paving the way for a face-saving compromise with Iran.

While OPEC's largest producer, Saudi Arabia, was open to higher production, Iran has been hesitant because sanctions imposed by U.S. President Donald Trump are making it hard for the country to export its oil.

Brent oil clocked a session high of $74.21 earlier today and was last seen trading at $74.00 - up 1.25 percent on the day.

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 said Trump had contributed to the rise in prices by imposing sanctions on Opec members Iran and Venezuela, which will likely lead to lower exports.

Iranian oil minister Bijan Zanganeh said in an exclusive interview on Wednesday that previously agreed limits on production remain the best way to balance global oil supply, demand and prices.

Falih also said the real increase for OPEC and non-OPEC would be smaller than the nominal gain of 1 million bpd.

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But Opec could still agree a last-minute deal on Friday by compromising on a lower output increase below 1 million bpd, Opec sources have said.

Nigerian Oil Minister Emmanuel Ibe Kachikwu, asked by reporters about his position on easing output cuts, said: "We need to discuss with our colleagues first before we make those decisions".

Iran has so far been the main barrier to a deal, with Zanganeh saying on Wednesday OPEC should not yield to pressure from U.S. President Donald Trump to raise output. The expectation that the increase will fall short of the 1 million bpd figure boosted the market.

In 2006-2008 and again in 2011-2014, surging oil prices resulted in a sharp slowdown in consumption growth in the advanced economies, though at the time many analysts dismissed signs of a slowdown.

"Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher USA policy toward Iran, Saudi Arabia's rival for influence in the region, and so will want to support Trump's call for lower prices".

Markets were also anxiously watching trade tensions between the United States and China, in which both sides have threatened to impose stiff duties on each other's export products, including US crude oil.

Iran's oil minister walked out of a key meeting with OPEC peers on Thursday, as a rift deepened with regional rival Saudi over its push to ramp up the cartel's oil output. The International Energy Agency, which represents consuming nations, expects demand to grow more slowly in the second half of this year partly due to rising oil prices - but still 1.35 million barrels a day higher than the same period in 2017.

Other reports by MaliBehiribAe

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