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Oil ministers back output hike despite Irans walkout

Oil ministers back output hike despite Irans walkout

Along with non-member Russian Federation, oil kingpin Saudi Arabia is pushing hard for OPEC energy ministers and allied countries to agree this week to ease a production cap that has more than doubled oil prices since 2016.

The Organization of the Petroleum Exporting Countries is meeting in Vienna together with non-OPEC oil producers to discuss output policy.

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

"We're hoping to come out of this with a reasonable decision", Saudi Energy Minister Khalid al-Falih told reporters moments before the OPEC meeting opened.

He said a recent rise in oil prices was mainly the fault of Washington, which imposed new sanctions on OPEC members Iran and Venezuela.

Iranian Oil Minister Bijan Zanganeh said on Thursday he still believes OPEC can not reach a compromise decision on raising oil output at its meeting the following day. Iran's output is also likely to fall in the second half of this year due to new United States sanctions. That reflects a one million barrel-a-day adjustment on paper to the production cuts implemented by the Organisation of Petroleum Exporting Countries and its allies, the delegate said, asking not to be named because the information is private. Iran will join a ministerial committee meeting on Thursday.

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 higher production and lower prices. Brent crude last month surged to a more than three-year high above $80 a barrel.

Many traders expect this discount to widen further should the flow of US oil to China slow, meaning that other producers would have to deal with high volumes of cheap American oil becoming available in other big markets, including Europe.

While Saudi Arabia is pushing to lift the cap, Iran would prefer to take advantage of high prices ahead of the imposition of USA sanctions in November.

But oil prices have found some support from global demand, which has been increasing strongly this year.

In the first three months of this year, USA crude made up around 5 percent of China's total crude imports, according to Chinese customs data.

"It will probably be around 600,000 or so", he said.

The only route to a production boost that Iran has publicly suggested - allowing the handful of countries that have voluntarily cut deeper than necessary to restore some output - would deliver far less extra oil to the market than the Saudi proposal.

By adding barrels to the market now, OPEC can stabilise or even increase inventories and ease shortages later in 2018/19.

"There were proposals but I don't think we can reach an agreement".

The problem for traders and ministers trying to estimate the price needed to rebalance the market is that consumption responds to price changes with a delay of six to 18 months.

He said that Mr Trump had contributed to the rise in prices by imposing sanctions on Iran and Venezuela, which will likely lead to lower exports.

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