Opec edged closer yesterday towards raising oil output, with Iran softening its opposition to an increase and Saudi Arabia warning of supply shortages and price rallies if production remained stable.
A production rise of about 1mn bpd, or around 1% of global supply, was emerging as a consensus for the group and its allies, Opec sources told Reuters, adding that Iran could agree under certain conditions.
The Organization of the Petroleum Exporting Countries meets today to decide output policy amid calls from top consumers such as the US, China and India to cool down oil prices and support the world economy by producing more crude.
Russia, which is not in Opec, has proposed producers raise output by 1.5mn bpd.
Saudi Energy Minister Khalid al-Falih said yesterday the world needed at least an extra 1mn bpd to avoid a shortage in the second half of 2018.
Opec and its allies have since last year been participating in a deal to cut output by 1.8mn bpd.
The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016.
But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8mn bpd in recent months.
Iran’s output is also likely to fall in the second half of this year due to new US sanctions.
Iran, Opec’s third-largest producer, has so far been the main barrier to a new deal as it said on Tuesday Opec was unlikely to reach an agreement and should reject pressure from US.
President Donald Trump to pump more oil.
But on Wednesday, Iranian Oil Minister Bijan Zanganeh said Opec members that had overdelivered on cuts in recent months should comply with agreed quotas.
That would effectively mean a boost from producers such as Saudi Arabia that have voluntarily cut more deeply than planned.
“An increase is acceptable if justified from the demand side and if it is agreed by all Opec members. An increase because of external pressure on Opec is not acceptable,” said a source familiar with Iranian thinking.
Ecuador said a compromise output increase could be agreed at around 0.6mn bpd but predicted a tough meeting today because Iran wanted to discuss US sanctions.
“Opec is not the place to discuss political issues or bans. They (Iran) have requested that but I don’t think it will go anywhere,” Ecuadorean Oil Minister Carlos Pérez told Reuters.
Al-Falih said the world could face a supply deficit of up to 1.8mn bpd in the second half of 2018 and that Opec’s responsibility was to address consumers’ worries.
“We want to prevent the shortage and the squeeze that we saw in 2007-2008,” al-Falih said, referring to a time when oil rallied close to $150 per barrel.
He said the exact mechanics of any increase would be decided among all Opec members today.
Three Opec sources said ministers would debate yesterday whether to raise supplies by 1mn bpd as the main proposal for the meetings of Opec and its allies today and tomorrow.
If the proposal were approved, all Opec members and their non-Opec allies could raise supplies pro-rata, with Saudi Arabia adding about 0.25mn-0.3mn bpd.
Iran had yet to agree to the proposal, the sources said.
Iraq and Venezuela have also opposed a relaxation of production cuts, fearing a slump in prices.
Yesterday, however, Iraqi Oil Minister Jabar al-Luaibi said: “We are in comprehensive talks with all ministers, especially Saudi Arabia and Iran, and we are trying to narrow that gap between the two”.
Zanganeh was due to attend a ministerial committee yesterday.
Iran is usually not part of the committee, which groups Russia, Saudi Arabia, the UAE, Oman, Kuwait, Algeria and Venezuela. Before the committee meeting, Zanganeh was also scheduled to meet Russian Energy Minister Alexander Novak for separate talks.



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