Global shares rise, oil prices jump on OPEC news

Marco Green
June 23, 2018

But Iranian Oil Minister Bijan Zanganeh said that was not the case: "Each country which has produced less (than its allocation) can produce more". West Texas Intermediate, the USA benchmark for the price of oil, was up 3.4 percent to $67.75 per barrel.

While OPEC's largest producer, Saudi Arabia, is seen to be open to higher production, Iran has been hesitant because of its trouble to increase output and tensions with the U.S. President Donald Trump has been calling publicly for the cartel to help lower prices.

United States crude rose 5.77 per cent to $US69.32 per barrel and Brent was last at $US75.61, up 3.5 per cent on the day.

The world's leading oil-producers have agreed to pump up production by about a million barrels a day.

Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production. Subsequently, the prospect of a full-blown trade war will likely dent risk on sentiment, which in turn will likely keep a lid on further gains for crude prices. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas.

The price of oil jumped after the announcement, with the worldwide benchmark, Brent, gaining 2.5 per cent to US$74.84 a barrel in London, and USA crude climbing 4.9 per cent to US$68.72 a barrel in afternoon trading in New York-on track for its biggest one-day rise since OPEC agreed in November 2016 to cut production.

"We want to prevent the shortage and the squeeze that we saw in 2007-2008", Falih said, referring to a time when oil rallied close to $150 per barrel.

Vandana Hari, a market analyst and founder of Vanda Insights, told UPI early Friday that it appears OPEC will agree only on lowering compliance to 100 percent, rather than outlining any specific production figures for the second half of the year. Venezuela's production has dropped amid domestic political instability. The minister said the difference between that amounts to "a little bit less than 1 million barrels".

Much of the current production shortfall has come from Venezuela, where an economic crisis has savaged petroleum production.

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

"Zanganeh can go back to his country and say "I won", because we are keeping the original agreement unchanged". He said OPEC could meet again in September to adjust the deal. The next formal OPEC meeting was set for December 3.

Other reports by Click Lancashire

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