Winning! OPEC Bows to Trump's Demand for Cheaper Oil

Winning! OPEC Bows to Trump's Demand for Cheaper Oil

"Accordingly, the Conference hereby decided that countries will strive to adhere to the overall conformity level of Opec-12, down to 100pc" beginning July 1.

Opec members have agreed on a combined increase in crude oil output of one million barrels per day, the oil minister of the Saudi Arabia said on Friday.

Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.

USA crude rose 5.77 per cent to $US69.32 per barrel and Brent was last at $US75.61, up 3.5 per cent on the day.

Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of USA sanctions, have all increased market worries of a supply shortage. But in reality, Nigeria's Oil Minister Emmanuel Ibe Kachikwu felt, the accord will add about 700,000 bpd of oil to the market in the second half of the year as several members are unable to increase their output. "Need to keep prices down!"

Al-Falih also said leaders from other countries including India, China and South Korea had also expressed concerns to him that their economies were "starting to feel the pinch of higher oil prices".

In November 2016, OPEC members cut production in order to manage drastically decreasing oil prices.

"Each country can only pro-rata increase their production and the majority of them can't increase their production at all", Wright said during an interview on "Countdown to the Closing Bell".

Investors feeling the jitters ahead of Turkish election
A woman votes at a polling station in a school during elections in Istanbul, Turkey, June 24, 2018. President Recep Tayyip Erdogan has urged people to get out and vote.

Iran complained that the market shortage was a ploy by Saudi Arabia to take Iran's share as soon as the oil embargo was implemented by President Trump.

The agreement comes after a week of tense negotiation at OPEC's headquarters in Vienna, Austria. This was a reversal of years of rising production and falling prices, which many saw as an attempt by Saudi Arabia and others to create an oil glut to discourage investment in USA shale oil production.

US shale companies, which kept pumping when the rest of the world cut back oil production, are in a strong position to benefit now that the Organization of the Petroleum Exporting Countries is boosting its output. "Those which can not, will not".

In practice, only Saudi Arabia and Russian Federation have the capacity to add significant amounts of crude in the next few months.

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

Much of the current production shortfall has come from Venezuela, where an economic crisis has savaged petroleum production. "And if it can not, others can not come in and produce on their behalf", Zanganeh said.

"Investor sentiments are shifting and they're no longer expecting a 1 million barrel a day rate hike", Benjamin Lu, a commodities analyst at Phillip Securities Singapore, told AFP. The measure has helped rebalance the market in the past 18 months and lifted oil to around $75 per barrel from as low as $27 in 2016.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months. Hence it compromised, creating a win-win situation for both the groups within Opec.

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