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Page added on June 23, 2018

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Saudi pledges ‘measurable’ oil supply boost as OPEC, Russia agree deal

Production

OPEC agreed with Russia and other oil-producing allies on Saturday to raise output from July, with Saudi Arabia pledging a “measurable” supply boost but giving no specific numbers.

FILE PHOTO: The logo of the Organization of the Petroleum Exporting Countries (OPEC) is seen at OPEC’s headquarters in Vienna, Austria June 19, 2018. REUTERS/Leonhard Foeger/File Photo

The Organization of the Petroleum Exporting Countries had announced an OPEC-only production agreement on Friday, also without clear output targets. Benchmark Brent oil rose by $2.5 or 3.4 percent on the day to $75.55 a barrel.

On Saturday, non-OPEC oil producers agreed to participate in the pact but a communique issued after their talks with the Vienna-based group provided no concrete numbers amid deep disagreements between OPEC arch-rivals Saudi Arabia and Iran.

U.S. President Donald Trump was among those wondering how much more oil OPEC would deliver. “Hope OPEC will increase output substantially. Need to keep prices down!” Trump wrote on Twitter after OPEC announced its Friday decision.

The United States, China and India had urged oil producers to release more supply to prevent an oil deficit that could undermine global economic growth.

OPEC and non-OPEC said in their statement that they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction.

Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC combined would pump roughly an extra 1 million barrels per day (bpd) in coming months, equal to 1 percent of global supply.

Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later.

“We already mobilized the Aramco machinery, before coming to Vienna, pre-empting this meeting,” Falih said, referring to the Saudi state oil company.

Russian Energy Minister Alexander Novak said his country would add 200,000 bpd in the second half of this year.

Asked to what extent the decision to increase supply had been driven by pressure from Trump, Novak said: “It is obvious that we are not being driven by tweets but base our actions on deep market analysis.”

IRAN, SAUDI DISAGREEMENT

Iran, OPEC’s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.

Trump slapped fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise output, unlike Saudi Arabia.

Iranian Oil Minister Bijan Zanganeh said the real increase could amount to as little as 500,000 bpd because Saudi Arabia would not be allowed to pump more on behalf of Venezuela, where output has collapsed in recent months.

“Each country which has produced less (than its allocation) can produce more. Those which cannot, will not… This means that Saudi Arabia can increase its production by less than 100,000 bpd,” Zanganeh told Argus Media.

But Falih said pro-rata quota reallocations did not have to be strict, meaning Saudi wanted to fill the gaps left by others.

“Some of the countries … are not going to be able to produce, so the others will. And that implies there will be indirectly a reallocation,” Falih said.

He also said OPEC could hold an extraordinary meeting before its next formal talks due on Dec. 3 or adjust deliveries in September, when its monitoring committee meets, if global oil supply fell further because of sanctions on Iran.

OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. 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.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018.

Reuters



3 Comments on "Saudi pledges ‘measurable’ oil supply boost as OPEC, Russia agree deal"

  1. twocats on Sun, 24th Jun 2018 8:27 am 

    I love how these articles are starting to bleed-through with anxiety over peak oil. Yes we are going to have the boats and nonys come in about political (sanctions and conflict) or economic conditions (not enough money being flushed down the toilet to produce marginal barrel – pipelines to pocket piddlings).

    but this is peak oil – this is what it looks like.

    just as one example – in 2009 biofuels were changed from renewables to Liquids. that’s like, what, 1.5 mbpd that is just a lie, a cover-up about the real condition on the ground.

    i guess unfortunately the coverup has worked. people are stoopid and fell for it. peak oil will only be acknowledged, if ever, long after society has imploded.

  2. Jagdish on Sun, 24th Jun 2018 10:14 am 

    Oil going higher to $100. Their IPO needs higher oil to scam the rich.

  3. Davy on Mon, 25th Jun 2018 5:12 am 

    Take this how you may that Trump is wrong or China but the net effect is likely a drop in global output. There is no way in the short term this trade battle will be made up elsewhere if we continue down the current path. The question is the degree and duration aspect of this drop. This could be a trigger for oils demand destruction. Maybe cooler heads will prevail and a bilateral economic understanding reached. In that case someone else will suffer. It is a closed system at least in the short term with trade flows.

    “US Futures Slump As Trump Drops New Bomb In Trade War; China Continues To “Weaponize” Yuan”
    https://tinyurl.com/ybhgayaz

    But there is a twist, as Rhodium noted, this is much more than simple M&A, it’s about capital outflows – which will really upset some of China’s wealthiest as they try to find new routes to de-Yuanize their assets…The rapid decline in Chinese FDI in the U.S. was driven by a “double policy punch” — Beijing cracking down on rapid outbound investment and the U.S. government increasing scrutiny on Chinese acquisitions through the Committee on Foreign Investment as well as taking a more confrontational stance toward economic engagement with China in general. Kyle Bass is pleased, judging by his latest tweet, Fantastic reporting from @paulmozur on how the Chinese steal from US companies. US to impose new Chinese investment restrictions this week. https://t.co/vN3McYNGWx — Kyle Bass (@Jkylebass) June 23, 2018 Confirming his previously noted position that Trump’s trade actions are simply about national security: Tariffs are simply about national security: Hayman Capital founder from CNBC. However, there are concerns as to just how this all ends, since as a former Obama administration official noted, the unilateral move by the Trump administration to invoke IEEPA would be unusual. “That’s a pretty sharp departure from the way things have been done in the past,” adding that “The Trump administration, kind of across the board, has very much blurred the line and seems to be saying that any significant economic challenge the US faces is also a national security challenge.”

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