It's crunch time for OPEC as oil prices rise


OPEC has agreed to increase oil production by one million barrels a day after a stormy meeting that saw Iran walk out of negotiations.

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

Opec has a history of hard meetings as well as clashes between Iran and Saudi Arabia.

"So what level of supply release - we will have to come to a consensus", he said.

The SCI finished sharply lower on Thursday following losses from the insurance and energy stocks, while the financials and oil companies were mixed.

He said that the world could face a supply deficit of up to 1.8 million barrels a day in the second half of the year, and maintained that it is OPEC's responsibility to address that imbalance.

The problem for traders and ministers trying to estimate the price needed to rebalance the market is that consumption responds to price changes with a delay of six to 18 months. There are different views on how much to increase production and whether such a move should be gradual, one source said following a meeting of Gulf oil ministers on Tuesday evening.

Since a year ago, OPEC and its allies have been participating in a deal to cut output by 1.8 million bpd.

Saudi Arabia and Russian Federation are pushing the coalition to ease quotas to fill any supply gap left by Venezuela's continued decline and the potential impact of USA sanctions on Iran, which snap back on November 5 and could shut in as much as 1 million b/d.

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While Iran has voiced skepticism in recent days about the prospect of a production increase, on Friday it sounded more flexible on the idea. She said OPEC ministers had acted as "their own worst enemies" by warning this week of a potential shortage of around 2 million barrels per day in the second half of 2018. The proposal has yet to win the backing of all OPEC members, and may also meet resistance from Venezuela, Algeria or Iraq - nations which have limited scope to increase production.

The Iranian publication Seda quoted anonymous sources as saying Zanganeh told the other producers that the proposed increase would pave the way for cuts in Iranian oil output that are likely to result from a reimposition of US sanctions against Iran in the fall.

Brent oil prices were up 1.8 per cent on Friday.

Officials from major oil-producing nations are expected to agree this week to boost output, but just how much they will open the spigot - and the effect on oil prices - remain wild cards.

Energy ministers are gathering in Austria to determine the future of global oil output.

The deal looked to be in line with many analysts' forecasts.

Zanganeh told CNN on Wednesday that if OPEC returned to regular compliance, the real supply increase from the group would constitute only around 460,000 bpd.

The uncertainty heading into today's OPEC meeting has kept numerous major hedge funds on the sidelines for weeks because even with their resources, they have been unwilling to place bets on either side of the market, given the volatility usually associated with an OPEC meeting.