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Oil prices rise ahead of OPEC’s June 22 meeting

22 June, 2018, 22:39 | Author: Kristi Dunn
  • Iran Rules Out OPEC Deal As Russia Saudi Push For Oil Output Hike

The Organisation of the Petroleum Exporting Countries met in Vienna in an effort to cool the market after oil prices rose to $80 a barrel.

Countries in the OPEC oil cartel have agreed to a new oil output level that effectively increases production by nearly 1 million barrels per day. The proposal has yet to win the backing of all OPEC members, and may meet resistance from more hawkish countries in the group including Venezuela and Algeria as well as Iran.

Saudi Energy Minister Khalid al-Falih also said on Wednesday that the market demanded more oil in the second half of this year and that OPEC was moving toward "a good decision".

"We are making good progress", said United Arab Emirates Energy Minister Suhail Al Mazrouei, who also now holds the position of OPEC president.

"I don't think we can reach agreement" on the proposal, Zanganeh said as he left the meeting.

"Investor sentiments are shifting and they're no longer expecting a 1 million barrel a day rate hike", Benjamin Lu, a commodities analyst at Phillip Securities Singapore, told AFP. Trump has been lobbying OPEC to help lower prices.

Traditional Saudi allies - the United Arab Emirates, Kuwait, Oman and Bahrain - believe Saudi Arabia was too quick to respond to U.S. calls for higher production, and have been rattled by Riyadh's close coordination with non-Opec Russia, sources said.

Some OPEC members have been opposed to a production increase, and others don't want to go as far as Saudi Arabia.

The real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap, OPEC sources have said.

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If this threat turns into reality, U.S. crude oil-which is now in high demand in Asia due to the wide $9-a-barrel discount to the Brent Crude global benchmark-will become uncompetitive.

Ministers have gathered in the Austrian capital to discuss a supply increase that would be equivalent to about 600,000 barrels a day, or 0.5 per cent of global supply.

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.

Saudi Arabia and Russian Federation on Thursday used a pre-OPEC meeting in the Austrian capital to float a proposal of bringing an extra one million barrels each day to the market.

Brent oil prices were up 1.8% on Friday.

The correction in prices have been a continuing trend since May 23, when prices breached the $80 mark after the announcement of new United States sanctions on Iran and ongoing supply disruptions in Libya and Venezuela.

Domestic crude oil production falls by 2.95%.

"The actual decision by OPEC and its partners - which may not actually become apparent until Saturday - is the big one traders are watching", said Greg McKenna, chief market strategist at futures brokerage AxiTrader. "Nigeria under this scenario must build capacity to participate easily when OPEC expands its production", he said. 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.

The cartel's largest producer, Saudi Arabia, is seen to be open to higher production but Iran has been hesitant.

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