OPEC and its allies yesterday gathered for a third successive day of meetings in Vienna to give the final sign-off to an oil production increase.
Major producers outside OPEC — including Russia, Mexico and Kazakhstan — met with ministers from the cartel in the Austrian capital to endorse a plan to add about 700,000 barrels per day of crude to the market starting next month.
The nonmembers were to approve the deal, which was sealed on Friday after a last-minute compromise between Saudi Arabia and Iran, four delegates said.
“I hope that today in the meeting with our friends in non-OPEC we as will reach the same conclusion” on a production increase, Emirati Minister of Energy Suhail al-Mazroui told reporters. “I am confident that it is not going to be a difficult meeting.”
Friday’s agreement was a fudge in the time-honored tradition of OPEC, committing to boost output without saying which countries would increase or by how much.
It gave Saudi Arabia and Russia — holders of the largest spare capacity in the group — the flexibility to respond to disruptions and moderate prices at a time when US sanctions on Iran and Venezuela threaten to throw the oil market into turmoil.
The terms of the deal were rather convoluted.
OPEC agreed on a “nominal” production increase of 1 million barrels per day, Saudi Arabian Minister of Energy, Industry and Mineral Resources Khalid Al-Falih said.
In reality, the accord would add a smaller amount of oil to the market, because a number of countries are unable to raise their output.
The official communique from the meeting did not mention any specific production numbers, instead pledging that the group would focus on restoring its output cuts to the level originally agreed in 2016.
Some traders were far from confident that such an agreement would meet the multiple challenges OPEC faces. The situation in Venezuela is volatile, with a wide range of predictions of how much further its production could slump as its industry unravels.
There are also growing signs that the renewed US sanctions on Iran could have a larger effect than a 1 million barrel per day reduction in exports seen in 2012.
Iran does not believe its customers will get waivers from the US government that would allow them to continue crude purchases, Iranian Minister of Petroleum Bijan Namdar Zangeneh said in a Bloomberg Television interview on Friday.
US officials have reportedly asked Japan to completely halt oil imports from Iran, going beyond cuts demanded by sanctions dating to the administration of former US president Barack Obama.
Crude prices surged on Friday following the vaguely worded OPEC agreement.
West Texas Intermediate crude jumped 4.6 percent to US$68.58 per barrel, the biggest gain in six months.
US President Donald Trump, whose tweets played a part in prompting Saudi Arabia to push for a production increase, on Friday said that he would be watching the progress of their new agreement closely.
“Hope OPEC will increase output substantially,” Trump said on Twitter. “Need to keep prices down!”
In other commodity trading, wholesale gasoline jumped 2.9 percent to US$2.07 per gallon and heating oil added 2.7 percent to US$2.13 per gallon, while natural gas slid 1 percent to US$2.95 per 1,000 cubic feet.
Gold slid 0.3 percent to US$1,270.70 per ounce, while silver added 0.8 percent to US$16.46 per ounce and copper edged up 0.2 percent to US$3.03 per pound.
Additional reporting by AP
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