Published: Fri, June 22, 2018
Economy | By Shawn Conner

Saudi oil minister proposes to increase supply by 1 million barrel

The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after Saudi Arabia persuaded Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage. "We are in for higher prices for longer", he said.

Iran's oil minister walked out of an OPEC meeting to increase the supply of crude.

The policy that has propelled the Nigerian economy upward since January 2017 might be maintained, as Saudi Arabia is considering a compromise to keep OPEC production.

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.

OPEC sources also said Iran had demanded that U.S. sanctions be mentioned in the group's post-meeting communique. "We're not going to allow a shortage to materialize to the point that markets will be squeezed and consumers will be hurt".

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But Iran has called on the group to resist pressure from U.S. President Donald Trump, who moved to reimpose sanctions on Tehran last month after announcing he would pull the United States out of Iran's nuclear agreement with world powers.

Oil prices fell after Al-Falih's comments, with benchmark Brent crude losing as much as 2.4 percent to $72.94 a barrel in London.

"Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher USA policy toward Iran, Saudi Arabia's rival for influence in the region, and so will want to support Trump's call for lower prices".

Falih said that recent production outages in Venezuela, Libya, and Angola have already reduced global supplies by about 1 million barrels a day.

AFP quotes analysts as saying the participating countries could simply agree to stop exceeding their quotas for cutbacks, and stick to the agreed target of trimming production by 1.8 million barrels per day (bpd).

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"Our customers have spoken loudly and we must listen to them", Al-Falih said before the ministerial talks on Thursday.

He said the exact mechanics of how the proposal should be carried out will be decided among OPEC members at their meeting on June 22.

Sources told Reuters on Thursday that Iran wants any increase to be justified on demand conditions and not dictated by outside external pressure, as even some of Saudi Arabia's traditional allies have accused the kingdom of bending too far to appease usa wishes.

Meanwhile Riyadh, which cheered Washington's exit from the Iranian nuclear deal, is under pressure from its U.S. ally to open the spigots as Trump hopes for lower pump prices ahead of November's mid-term elections.

An increase in Opec production will be particularly helpful for the VLCC market, which is on track for the worst year in history due to severe vessel over-supply, according to Amit Mehrotra of Deutsche Bank.

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