The countries of the OPEC oil cartel agreed Friday to effectively increase their combined production by nearly 1 million barrels a day, though questions remain over some of the members' ability to do so amid domestic trouble and sanctions.
The green light was widely expected after energy ministers from the 14-member Organization of Petroleum Exporting Countries already agreed on Friday to raise output by one million barrels a day from July.
Ahead of Friday's meeting, OPEC's largest producer, Saudi Arabia, was seen to be open to higher production but Iran had been hesitant. This rare request from Washington came after United States retail gasoline prices surged to their highest point in three years and President Donald Trump publicly complained about Opec policy and rising oil prices.
Because the group had been producing below that level, that means an increase in production of "a little bit less than 1 million barrels", the Emirati minister said. The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016. West Texas Intermediate, the US benchmark for the price of oil, was up 3.4 percent to $67.75 per barrel. They will discuss with OPEC on Saturday on whether to increase their own production. The figure has been inflated by a plunge in supplies from almost bankrupt Venezuela.
"The effective increase in output can easily be absorbed by the market", Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, told the Reuters Global Oil Forum.
The most recent price rally followed an OPEC decision to restrict supply in an effort to drain global inventories. The group said compliance reached 152 percent in May 2018, which means OPEC was cutting about 600,000 bpd more than it intended.
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Worldwide marker, Brent, traded above US$100 a barrel for several years until 2014, dropping to nearly US$26 in 2016 and then recovering to over US$80 last month.
The group's communique still pledged a return to 100% compliance with the original 2016 agreement - ending a period of deeper-than-intended cuts - but Al-Falih insisted that no individual country will be subject to a strict output cap.
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.
Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later.
The performance of the United Arab Emirates' oil minister and OPEC President Suhail Mazrouei was a master class in how to avoid a question. "Falih can go back and say "we will be able to raise production to meet market needs".
On Saturday, June 23, the final decision will be made at a meeting of OPEC+, which includes a number of oil-exporting countries, including Russian Federation.
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