Published: Fri, June 22, 2018
Money | By Hannah Jacobs

OPEC discussing oil production increase to ease energy costs

"Reallocating (output) to other countries like Saudi Arabia may be a technical solution but it may not be politically acceptable to others", he said.

The output curbs have been in place since January 2017 but Saudi Arabia, backed by non-member Russian Federation, is now pushing to raise production again in order to meet growing demand in the second half of 2018.

The Iranian publication Seda quoted anonymous sources as saying Zanganeh told the other producers that the proposed increase would pave the way for cuts in Iranian oil output that are likely to result from a reimposition of US sanctions against Iran in the fall.

Saudi Arabia and some other Persian Gulf producers have supported the United States in imposing sanctions on Iran. He said OPEC could meet again in September to adjust the deal.

If all Opec members produced as much as they were allowed under the deal, Opec output would in theory rise by about 740,000 barrels per day, based on Reuters estimates of the group's production in May.

Saudi Arabia and non-Opec Russia have said a production increase of about 1 million barrels per day (bpd) or around 1% of global supply had become a near-consensus proposal for the group and its allies. The number of traders net-long is 3.8% lower than yesterday and 18.3% lower from last week, while the number of traders net-short is 17.5% higher than yesterday and 4.2% higher from last week.

Saudi Energy Minister Khalid Al Falih, asked whether he expected an easy meeting on Friday, said: "We will find out. Such a decision, if implemented, would have a large impact on the supply-and-demand fundamentals by creating implied stock builds averaging 0.9 million b/d in H2 2018, and 1.8 million b/d in 2019", the group said in email on Wednesday.

OPEC's decision confused some in the market as the producers gave opaque targets for the increase, making it hard to understand precisely how much more it will pump.

Zanganeh, speaking to reporters on the sidelines of a Vienna seminar earlier this week, accused Trump of trying to politicize OPEC and said it was United States sanctions on Iran and Venezuela that had helped push up prices.

Opec has a history of hard meetings as well as clashes between Iran and Saudi Arabia.

The cartel's largest producer, Saudi Arabia, wants higher prices but hears President Donald Trump, leader of its most important ally, lobbying openly for lower prices.

Zanganeh was due to attend a ministerial committee on Thursday, two sources said.

President of Nigerian Association for Energy Economics (NAEE), Prof Wumi Iledare urged the federal government to take necessary steps in boosting the country's capacity to produce more.Iledare, who noted Nigeria's current level of production would not favour the country for higher quota, said OPEC understands the oil market dynamics.

The Bloomberg headline earlier says that OPEC members have come to an agreement on principle for an output increase of 1 million bpd on paper.

They nevertheless tried to bring Iran on board for a deal, with ministers from the UAE, Kuwait and Oman meeting Zanganeh on Wednesday.

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

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