Mubasher: Meeting between members of the Organization of Petroleum Exporting Countries (OPEC) on Friday seemed to result in an agreement on ramping up oil supply.
This possibility came after the group’s de facto leader Saudi Arabia appeared to have convinced its arch-rival Iran to cooperate over the production policy.
Speaking to reporters in conference on early Friday, Iranian Oil Minister Bijan Zanganeh said that his private talks with Saudi Energy Minister Khalid al-Falih have yielded success.
When asked whether OPEC and its allies could reach a deal in Friday’s meeting, Zanganeh said: “We are cooking something,” signalling a possible agreement, while he added that Tehran would be content with crude prices reaching $70 per barrel (pb).
In the same vein, United Arab Emirates’(UAE) Energy Minister Suhail Al-Mazrouei said that no member would be “willing to run walk away from the success we have achieved,” expecting that the meeting would “not be very long."
In addition, Saudi Energy Minister said that an “immediate flood” of output coming back to the market following the meeting is unlikely, while warning against the possibility of a supply deficit of 1.8 million barrels per day (bpd) in the second half of the year.
Saudi Arabia and Russia have been pushing for boosting oil production by about 1 million bpd, after 18 months of tight output curbs in place, while the proposed increase became almost a consensus among 14-member OPEC and non-OPEC allies, with Iran left as the main barrier to a possible agreement.
The production increase by 1 million bpd would follow a “gradual” and pro-rata approach, al Falih said.
Moreover, the actual increases are set to be around two-thirds of Saudi Arabia’s target, as some OPEC members would not manage to boost production, industry sources familiar with the group’s discussions told CNBC, at the time when analysts project the amount to range from 600,000 to 800,000 bpd.
Meanwhile, it is still possible for the meeting to end without a deal, hours ahead of a final decision over the matter.
US President Donald Trump has imposed new sanctions on Tehran last month, leading to an estimated fall in the OPEC third biggest oil producer’s production by nearly a third by the end of 2018.
This means that Iran is not likely to benefit from a supply increase.
On a side note, Nigerian petroleum minister Emmanuel Kachikwu told CNBC ahead of the meeting that there were sympathy towards Iran among, but memebers pushed back from mentioning the US sanctions, given that OPEC is not “a political organisation.”
By 12:33 pm GMT, US Nymex futures jumped 1.62% to $66.60 pb, while global Brent crudes surged 2.23% to $74.68 pb.
