OPEC strikes deal to boost oil production

Marco Green
June 23, 2018

OPEC agreed on a modest increase in oil production from July after its leader Saudi Arabia persuaded arch-rival Iran to cooperate amid calls from major consumers to help reduce the price of crude and avoid a supply shortage. But many members cut even deeper, and political events around the world-turmoil in Venezuela and the end of the USA nuclear deal with Iran-took additional volume off global markets.

The 24 nations in the supply-cut pact, known as Opec+, agreed in late 2016 to trim production by 1.8 million barrels a day but they have actually been keeping some 2.8 million barrels per day off the market.

US crude CLcv1 rose 5.77 percent to $69.32 per barrel and Brent LCOcv1 was last at $75.61, up 3.5 percent on the day.

Two years ago, OPEC and Russian Federation set about raising the price of oil by cutting output.

The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who anxious that high oil and gasoline prices would be politically painful ahead of midterm elections later this year. 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.

Saudi Arabia's Oil Minister Khalid al-Falih talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, June 22, 2018. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? "We're taking our breath and focusing on the oil market", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, NC. "I think Saudi [Arabia] wants to prevent that".

Production levels from participating members put compliance at more than 100 percent, though some of that is attributed to Venezuela.

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. The next formal OPEC meeting was set for December 3.

Other reports by Click Lancashire

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