Iran says doesn't think OPEC can reach deal

Robyn Valdez
June 24, 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.

Last year, OPEC members unanimously agreed on the oil price of USD 60 dollars per barrel, by cutting oil output by 1.2 million barrels per day (bpd) to 32.5 million bpd.

Markets are also watching tension between the United States and China, with both sides threatening to impose duties on each other's exports, including USA crude oil.

Saudi Energy Minister Khalid al-Falih said on Thursday the world needed at least an extra 1 million bpd to avoid a shortage in the second half of 2018.

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In a night of drama in Vienna, the Joint Ministerial Monitoring Committee, which recommends policy to the group, reached an agreement despite Bijan Zanganeh, the Iranian oil minister, walking out of the meeting and predicting Opec won't reach a final deal when it meets formally on Friday.

Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of U.S. sanctions, have all increased market worries of a supply shortage. Sources said a production rise of about 1 million bpd was emerging as a possible consensus for OPEC and its allies, adding that Iran could assent under certain conditions.

Essner is betting that the Vienna meeting will yield an agreement to boost production by 500,000 to 800,000 barrels a day, far below the 1.5 million barrel figure floated recently by Russia's oil minister, Alexander Novak.

But they have run into resistance from Iran, Iraq and Venezuela, who would struggle to immediately raise output and fear losing market share and revenues if other countries open the spigots. Brent crude last month surged to a more than three-year high above $80 a barrel.

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Big oil consuming nations such as India have been calling on the producers to pump more barrels following a sharp rise in prices.

- Iran has signalled that it would oppose any Saudi move to fill other producers' supply gaps. That may seem insignificant in a global supply of 98 million barrels a day, but critically it would reverse reductions that the same countries approved in late 2016, helping push crude higher by more than 50 percent. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.

Analysts have called this week's OPEC talks the most fractious and politically charged in years.

"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. That crimped the country's ability to export crude, limiting supply and pushing up global prices.

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Zanganeh told CNNMoney's Emerging Markets Editor John Defterios that OPEC and other major producers should address rising prices by increasing output to the maximum allowed under the terms of the agreement, which came into force in 2017.

Other reports by Info About Network

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