Iran to oppose proposal to raise OPEC crude output

Iran to oppose proposal to raise OPEC crude output

Iran to oppose proposal to raise OPEC crude output

Iran said on Tuesday OPEC was unlikely to reach a deal on oil output this week, setting the stage for a clash with Saudi Arabia and Russian Federation, which are pushing to raise production steeply from July to meet growing global demand.

A production rise of about 1 million bpd was emerging as a consensus, OPEC sources told Reuters on Thursday, adding that Iran could agree to that under certain conditions.

Iran's Oil Minister Bijan Namdar Zanganeh walked out that meeting, telling reporters he did not think an agreement could be reached.

Trump imposed fresh sanctions on Tehran in May and market watchers expect Iran's output to drop by a third by the end of 2018.

Brent reached a 3-1/2-year high above $80 a barrel last month but has fallen steadily in recent weeks as Saudi Arabia, de facto leader of OPEC, has signalled it intends to raise production to stabilise prices.

The Saudi oil minister said in an interview with CNNMoney on Thursday that there could be "a deficit in the second half of this year of 1.6 to 1.8 million barrels".

Global consumption has increased by an average of 1.7 million bpd for the last three years, accelerating from an average of 1.1 million bpd in the three previous years.

The measure has helped rebalance the market in the past 18 months and lifted oil to around $73 per barrel from as low as $27 in 2016.

Zanganeh told CNNMoney's Emerging Markets Editor John Defterios that OPEC and other major producers should address rising prices by increasing output to the maximum allowed under the terms of the agreement, which came into force in 2017.

"There isn't a lot of spare capacity in the world". Outages in some nations and deeper-than-agreed cuts by others have made the actual reduction larger by about 1 million barrels a day.

Some investors were expecting more from OPEC, and United States crude futures spiked 3.5% to $67.80.

The meeting continued for around two hours after Zanganeh left.

USA crude inventories fell by 3 million barrels to 430.6 million barrels in the week to June 15, according to an American Petroleum Institute report on Tuesday.

Ministers have gathered in the Austrian capital to discuss a supply increase that would be equivalent to about 600,000 barrels a day, or 0.5 per cent of global supply.

For OPEC, over-compliance with its oil supply-cutting deal is a nice problem to have.

The convoluted plan shows the difficulty Saudi Arabia has in bridging the gap between the competing interests of different members.

"Today's EIA report appeared unequivocally bullish to WTI given a much larger than expected crude stock draw of nearly six million barrels that was more than double our anticipated increase", Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a note.

OPEC Secretary-General Mohammad Barkindo said he was confident there would be a deal on Friday.

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.

Today's OPEC meeting is also highly important for the market watchers amid the growing trade tension between the United States and China, where both the countries have warned imposing import tariffs on each one's crude products.

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