Saudi Energy Minister announces OPEC consensus to Increase Production

After a successful Saudi-Iranian Meeting to increase oil production to one Million barrel daily.

Saudi Arabia’s energy minister has announced a consensus in OPEC to increase production by one million barrels per day during their quarterly meeting in Vienna on Friday.

Earlier, Iranian Oil Minister Bijan Zangana said he and his Saudi counterpart reached a joint understanding on the level of oil production.

Zankana held a meeting with his Saudi counterpart before the meeting of the Organization of Petroleum Exporting Countries (OPEC) in his country, during which he discussed the latest developments in the oil markets, according to IRNA.

The output targets set by non-OPEC member states in late 2016, which account for more than 50 percent of the world oil supply, have led to higher prices and Saudi Arabia, the world’s top oil producer, has called for boosting production to meet rising demand.

«We have to show responsibility and interaction by making a consistent offer», Saudi Energy Minister Khalid Al Falih said.

In practice, Saudi Arabia and Russia on Thursday expressed their desire to increase OPEC and its partners by 1 million barrels a day to cope with a significant market improvement.

However, Iran has announced its rejection of any amendment to the terms of the agreement on the ceiling of production in force since the beginning of 2017.

Iranian Energy Minister Bijan Namdar Zangneh left Vienna on Thursday for a meeting of ministers and told analysts that «no agreement will be reached» on Friday, as any unanimous amendment is required.

Iran fears that after the United States announced in May that it would withdraw from Iran’s nuclear deal signed in 2015, rising prices could cause more losses in revenues and market shares, especially over Saudi Arabia’s rival.

Iran, along with Iraq and Venezuela, which is in a dire economic crisis, has little capacity for production and export.

Saudi Arabia and Russia say the goal of increasing production by 1 million barrels a day is to «avoid market shortages», according to Al Falih.

The proposal is based on OPEC figures, saying the first deal, aimed at cutting production by 1 and 8 million bpd, has actually cut production by 2.8 million barrels.

«The OPEC countries will discuss this option on Friday and then between OPEC and its partners on Saturday», Russian Energy Minister Alexander Novak said at a second meeting in Vienna.

Iran is producing oil at a historically high level, but its industry could be paralyzed by sanctions resulting from the US decision to withdraw from the nuclear deal.

«Trump has created the latest market difficulties by imposing sanctions on two OPEC member states, Iran and Venezuela», he said.

On the other hand, Trump criticized OPEC on Twitter and accused it of keeping prices at a high level while gasoline prices in the United States are increasing a few months before a crucial legislative election.

In Russia, private oil companies face increasing difficulties in justifying their failure to benefit from high oil prices by increasing production to their shareholders.

The decision by OPEC members and non-OPEC producers to cut production in 2016 led to a rise in gold prices, which fell below $ 30 in early 2016 before returning to more than $ 70 in the second quarter of 2018.

The agreement, which expires in late 2018, requires the consensus of OPEC member states to pass any amendment, which puts Iran in a position of strength.

But Saudi Arabia is proposing to be part of the increase in production through a redistribution of unused production quotas by some countries like Venezuela.

Novak warned Thursday that «we must avoid any price spikes in the markets».

This oil production increase by extending agreement OPEC+ between Russia and Saudi Arabia.

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