Published: Sun, June 24, 2018
Money | By Michele Stevens

OPEC, non-cartel agree to share increased oil production

OPEC, non-cartel agree to share increased oil production

The governor's comments highlight the dispute between Iran and Saudi Arabia as to how OPEC should react to a production shortfall by Venezuela.

But since the group had gone well overboard and trimmed output by nearly 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market - on paper, at least. The US legislative threat, as damaging as it might be more broadly if it ever became law, is nevertheless likely to hang over the next round of OPEC deliberations in September, especially if prices are again surging.

Investors fear a possible decline in worldwide demand, at the time this sector continues to detoriorate in Venezuela.

"If we allocated the number pro-rata basis among the 24 countries, given the capacity of those countries that can increase, it had been estimated that about 60 percent will be achieved", Al-Falih said. Crude oil price in India surged from $50.57 bbl in May a year ago to $75.31 bbl this May.

US President Donald Trump was among those wondering how much more oil OPEC will deliver.

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Meanwhile Riyadh, which cheered Washington's exit from the Iranian nuclear deal, is under pressure from its United States ally to open the spigots as Trump hopes for lower pump prices ahead of November's mid-term elections.

"Need to keep prices down!" he tweeted.

"Twitter is not one of the instruments we base our decisions on", Novak added, referring to Trump. In an acknowledgement of how successful that pact has been in raising prices, the alliance recommitted itself to aim for 100% compliance with the deal.

There are also growing signs that the renewed USA sanctions on Iran could have a larger effect than a 1 million barrel per day reduction in exports seen in 2012. He was repeatedly asked whether countries with spare production capacity - mainly Saudi Arabia - would be able to make up the volumes that others can't produce.

This comes as market participants were pricing in an increase in the global oil supply ahead of the OPEC meeting amidst calls from energy consumers to contain rising fuel costs.

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Riyadh has invited Moscow to join OPEC as an observer, the Saudi energy minister says.

Some traders were far from confident that such an agreement will meet the multiple challenges OPEC faces.

OPEC sources also said Iran had demanded that US sanctions be mentioned in the group's post-meeting communiqué.

Trump imposed fresh sanctions on Tehran in May and market watchers expect Iran's output to drop by a third by the end of 2018.

The major oil-producing countries agreed to increase oil production by up to a million barrels a day with the hopes of bringing down prices and shoring up global oil supplies starting July 1. Those which can not, will not. In particular, further declines in Libyan and Venezuelan output could easily offset increases from Saudi Arabia and Russian Federation.

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Also, others with high production levels will not be allowed to fill the gap. Jeanette Casselano, director of external communications at the group, said even if prices don't fall any time soon, consumers should be pleased that relief at the pump is on the way. Added to that is demand, which grew by a stunning 1.5 million bpd in 2017 and is expected to grow between 1.3 and 1.65 million bpd this year. The measure had helped rebalance the market in the past 18 months and lifted oil to around $75 per barrel from as low as $27 in 2016.

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