24 June, 2018
The output curbs have been in place since January 2017 but Saudi Arabia, backed by non-member Russian Federation, is now pushing to raise production again in order to meet growing demand in the second half of 2018.
The measure has helped rebalance the market in the past 18 months and lifted oil to around $73 per barrel from as low as $27 in 2016.
Worldwide marker, Brent, traded above $100 a barrel for several years until 2014, dropping to nearly $26 in 2016 and then recovering to over $80 last month.
Brent futures fell after Saudi Energy Minister Khalid al-Falih said that the market demands more oil in the second half of this year and that OPEC was converging on a good decision on production policy this week.
Bijan Namdar Zanganeh, Iran's oil minister, stormed out of the meeting on Thursday evening.
That would effectively mean a modest boost from producers such as Saudi Arabia that have been cutting more deeply than planned despite production outages in Venezuela and Libya.
A production rise of about 1 million bpd was emerging as a consensus, OPEC sources told Reuters on Thursday, adding that Iran could agree to that under certain conditions.
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Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher USA policy toward Iran, Saudi Arabia's rival for influence in the region, and so will want to support Trump's call for lower prices.
Venezuela, in the throes of an economic crisis, is also opposed to easing the cartel's output curbs, as are several other countries, including Iraq and Nigeria, who would struggle to immediately increase production. An increase of 600,000 b/d would not be sufficient to close the 2H expected supply gap, which could reach as high as 1.8 Mbd.
Iran's Zanganeh has accused Trump of trying to politicise OPEC and said it was United States sanctions on Iran and Venezuela that had helped push up prices. The credibility of the revitalized organization and the legitimacy of its alliance with non-OPEC producers, and its promises to bring price stability to the market, are on the line.
This would nearly certainly lead to a sharp drop-off in Chinese purchases of U.S. crude, which have boomed in the past two years to a business now worth about $1bn a month.
So an OPEC deal to increase output could also influence the balance of power in the Middle East.
Some traders expect USA barrels to get trapped if the dispute between the world's two biggest economies turns into a fully blown trade war, which in turn would force own the price of US crude even further.
Another big uncertainty for oil is the escalating dispute between the United States and its trading partners, which could hit U.S. crude oil exports to China. The minister said that amounts to "a little bit less than 1 million barrels".
"You think about 1 million bpd coming back online ... it's not going to happen instantaneously, it's going to take time", said Brian LeRose, the senior technical analyst at ICAP.