Nigeria, S-Arabia, others disagree over oil supply

Daniel Fowler
June 22, 2018

Moscow and Riyadh have argued that OPEC should heed calls from major oil-consuming countries like China, India, and the United States to lift their 2016 production freeze to rein in rising oil prices.

OPEC's de facto leader, Saudi Arabia, and Russian Federation say it's now time to boost output again, while top OPEC members Iran, Iraq, Venezuela and Kuwait aren't on board.

Friday's big OPEC meeting in Vienna will have a big influence on how much consumers pay at the pump over the next several months; it appears likely prices will moderate.

That would effectively mean a modest boost from producers such as Saudi Arabia that has been cutting more deeply than planned despite production outages in Venezuela and Libya.

For Opec, over-compliance with its supply-cutting deal is a nice problem to have. 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 24 nations in the pact, known as OPEC+, initially agreed to trim production by 1.8 million barrels a day but they have actually been keeping more than two million bpd off the market.

Saudi minister said there is broad support for the proposal to raise crude output by one million barrels a day, according to the Wall Street Journal, however, Iran is reportedly playing a hardball.

The 24 nations in the pact, known as OPEC+, are now keeping more than two million bpd off the market.

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"Even with this increase, we see the market remaining in deficit in H2 2018, which should see prices remain well supported", ANZ said.

Other OPEC-members, including Iran, are against such a move, fearing a sharp slump in prices.

The cartel's largest producer, Saudi Arabia, wants higher prices but hears President Donald Trump, leader of its most important ally, lobbying openly for lower prices.

Zanganeh was due to attend a ministerial committee on Thursday, two sources said. Iran is not part of the JMMC, but it was invited for consultations.

"While China could secure the crude from alternative sources, such as West Africa which has a similar quality to US crude, the USA would find it hard to find an alternative market that is as big as China", Suresh Sivanandam, senior manager, Asia refining, at Wood Mackenzie, said earlier this week, commenting on the impact of possible Chinese tariffs on USA oil imports.

Index provider MSCI said late on Wednesday it would reclassify Argentina and Saudi Arabia as emerging market countries next year, broadening the investor base for both countries.

They nevertheless tried to bring Iran on board for a deal, with ministers from the UAE, Kuwait and Oman meeting Zanganeh on Wednesday.

OPEC may be unable to bridge the divide, as Bloomberg reported that ministers at Thursday's meeting agreed to a nominal increase of 1 million bpd despite Iran's opposition.

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