OPEC oil ministers gather to discuss production level

22 June, 2018, 15:59 | Author: Lora Ball
  • Oil pumps are seen in Lake Maracaibo in Lagunillas Ciudad Ojeda in the state of Zulia Venezuela

According to Jain, for the oil markets, the Opec meeting is crucial, as its planned 1.8 million barrels per day (mb/d) output cut went a long way in boosting crude oil prices. On the other side, less privileged OPEC members like Iran, Venezuela, Iraq, Angola, Libya and Nigeria whose production levels have been under pressure by different geopolitical and economic factors like US sanctions and budget deficit need the prices to stay at current levels.

Resistance is being led by Iran, deeply wary of any move by regional rival Saudi Arabia that could push down oil prices at a time when Tehran faces renewed sanctions following US President Donald Trump's decision to quit its worldwide nuclear deal, which is likely to send the country's oil exports plummeting. On one side, under the US influence [either in the form of alliance or sanctions] Saudi Arabia and non-OPEC-member Russian Federation, which had a significant role in reaching the deal, are said to be willing to ease the production cap and use some of their spare capacities.

Increased production of United States shale oil took some sheen away from the anticipated impact of the output cuts.

The fund seeks to match the inverse performance of the spot price of light sweet crude oil.

Tankers waiting to load more than 24 million barrels of crude, nearly as much as state producer PDVSA shipped in April, are sitting off the Opec member's main oil port.

Zanganeh said he would leave Vienna on Friday before OPEC holds talks with non-OPEC producers the next day and added a recent rise in oil prices was mainly the fault of Washington, which imposed new sanctions on OPEC members Iran and Venezuela. With potential 1 million barrels/day addition by OPEC, the market looks to be well supplied until next year.

This faction is reportedly also supported by Iraq. "The Opec/non-Opec cartel is the big beneficiary of all this oil diplomacy, as it will squeeze global spare oil capacity and likely push up crude prices".

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Iran's comments show that OPEC members are set to clash when they meet later this week in Vienna to discuss the proposal to end global output cuts.

Matt Smith, director of commodity research for ClipperData, says the Saudi oil minister has been signaling that a boost in production is coming. Output in Saudi Arabia jumped by 85,500 barrels a day, but was partly offset by production outages in Nigeria, Venezuela and Libya.

On Saturday, Novak said he and his Saudi counterpart Khalid al-Falih had agreed to propose to the group to up production by 1.5 million bpd beginning in July.

Oil traders are closely watching a threat by China to react to US tariffs by putting a 25 percent duty on USA crude oil imports, which have been surging since 2017 to a value of nearly $1 billion per month.

'Opec typically put aside political rivalries and agree on economic ones, but there is no disputing the current differences, which will make this meeting much more controversial and uncertain, ' said Rebecca O'Keeffe, head of investment at Interactive Investor.

This has lowered expectations regarding increasing the output to 300-800k barrels.

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