Published: Thu, June 21, 2018
Economy | By Shawn Conner

Could China turn to Iran oil? Former Exxon president weighs in

Could China turn to Iran oil? Former Exxon president weighs in

Three Opec members - Iran, Venezuela and Iraq - have been reluctant to consent to a formal increase in Opec's output target, agreed as part of a deal with Russian Federation and other non-member producers and running until the end of 2018.

Saudi Energy Minister Khalid Al-Falih said Thursday that OPEC members and other countries who agreed in November 2016 to cut output should increase supply by about one million barrels per day to prevent a shortage.

But analysts said trade concerns and disagreements within the Organization of the Petroleum Exporting Countries (OPEC) over boosting supply continue to loom over the market. The market is now under "OPEC-Watch" with numerous major players on the sidelines until the cartel along with Russian Federation makes its decision about production rates at its meeting in Vienna on June 22-23.

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In a sign of strong demand, United States refineries processed a seasonal record of 17.7 million barrels per day (bpd) of crude oil last week, according to data from the Energy Information Administration (EIA) said on Wednesday.

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.

Iran has signaled that it would oppose any Saudi move to fill other producers' supply gaps.

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The decision sparked concerns in the USA that China would turn to Iran as a potential oil supplier, buoying the Iranian market in the midst of the White House's reinstatement of hardline sanctions on Tehran.

If all Opec members produced as much as they were allowed under the deal, Opec output would in theory rise by about 740,000 barrels per day, based on Reuters estimates of the group's production in May. Venezuela's oil industry is collapsing due to years of mismanagement and an economic crisis. Pradhan said India does not support the prevailing high price.

OPEC takes its decisions by unanimity, so if Iran were to wield its veto Saudi Arabia would be left only with the option of assembling a coalition of willing countries to bypass Tehran's opposition.

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