Russia backs OPEC oil output hike

OPEC strikes deal to boost oil production | TheHill

OPEC to raise oil production from July

The Organisation of the Petroleum Exporting Countries announced its OPEC-only agreement on Friday, but gave no clear output targets.

Opec's decision confused some in the market as the producers gave opaque targets for the increase, making it hard to understand precisely how much more it will pump.

But regional rival Iran has bristled at the thought of lifting the output ceiling at a time when its oil industry is facing renewed sanctions over US President Donald Trump's decision to quit the global nuclear deal with Tehran.

The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after its de facto leader Saudi Arabia persuaded Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.

"I agreed to have 100 percent of compliance, not more", Iran's Zanganeh said as he left OPEC headquarters on Friday. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.

Analysts say supply increases are more likely to fall in a range between 600,000 to 800,000bpd.

Saudi Arabia said the increase would amount to less than 1 million bpd, while Iraq said it would be around 770,000 bpd.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018.

The newly proposed increase to production levels may simply help mitigate those recently displaced supplies.

Moscow had long argued for a hike, feeling the pressure from domestic oil companies eager to produce more so they can cash in on the higher prices. Compliance has been well above 100% this year since some countries, notably Venezuela, have seen a drop in production. On that same note, United States oil stockpiles - whilst lingering near their five-year average from 2013 to 2018 - remain approximately 29 percent above their 2008-2013 five-year averages. Iran, for example, has been hit by US sanctions that hinder its energy exports.

The announcement follows an agreement between OPEC and non-members led by Russian Federation to increase crude oil output by a million barrels per day.

Downside oil price actions may further be influenced by growing US production and the world's economic picture turning sour over the "Make America Great Again US Vs. EU, China and the rest of the World" looming trade war. However, Crude oil prices should still remain north of the $60 mark going into the year-ahead, especially considering global storage levels have only come down toward five-year averages based on some of the highest inventory levels recorded in decades of trades.

Oil prices have been on a roller-coaster ride over the last few years, with the global marker, Brent, trading above $100 a barrel for several years until 2014, dropping to nearly $26 in 2016 and then recovering to over $80 last month.

The group started withholding supply in 2017 and this year, amid strong demand, the market tightened significantly, triggering calls by consumers for higher supply.

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