Economy

OPEC to increase oil production by 1 million barrels from July

OPEC to increase oil production by 1 million barrels from July

OPEC agreed on Friday on a modest increase in oil production from July after its leader Saudi Arabia persuaded arch-rival Iran to cooperate amid calls from major consumers to help reduce the price of crude and avoid a supply shortage.

Brokered by Algeria, the deal to cut production volumes - following OPEC's 2014 attempt to break the US Shale-Oil industry by permitting the global supply overhang - nears its official end in the second half of the year.

As tensions mounted, the Iranian and Saudi ministers huddled for bilateral talks on Friday morning, holding up the start of the closely watched OPEC meeting.

"Opec member countries have exceeded the required level of conformity that had reached 152pc in May 2018", Opec said in its communiqué.

As a result, oil supplies fell deeper than expected, and oil prices rose more than expected.

Al-Falih also said the real increase for OPEC and non-OPEC would be smaller than the nominal gain of 1 million bpd.

Iranian Oil Minister Bijan Zanganeh said the real increase could amount to as little as 500,000 bpd because Saudi Arabia would not be allowed to pump more on behalf of Venezuela, where output has collapsed in recent months.

U.S. President Donald Trump had been calling publicly for the cartel to help lower prices by producing more.

USA stocks are closing higher Friday as oil prices and energy companies rallied.

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OPEC didn't agree to increase production as such. The expectation that the increase will fall short of the 1 million bpd figure boosted the market.

Up to April 2018, while oil prices increased by almost 25% compared to the same period previous year, investment in oil industry has not picked up in a commensurate manner.

Press reports say the United States government has also been quietly pushing Saudi Arabia and its Opec allies to increase oil production by about 1m bpd. "The aim of the deal is to return total compliance to the current output agreement to 100%".

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. "As individual countries, it is challenging", said United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui.

Outside the group, it's just Russian Federation that can raise output quickly.

Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher US policy toward Iran, Saudi Arabia's rival for influence in the region.

"That is the big news of the day, both the OPEC news and just the reaction of the stocks as well", said Tim Ghriskey, Chief Investment Strategist at Inverness Counsel in New York, New York.

Liberty Oilfield Services Chairman Chris Wright on how OPEC ministers agreed to raise oil production.

He also said OPEC could hold an extraordinary meeting before its next formal talks due on December 3 or adjust deliveries in September, when its monitoring committee meets, if global oil supply fell further because of sanctions on Iran.