OPEC Agrees to Boost Oil Output

Traders work on the floor of the NYSE in New York

Traders work on the floor of the NYSE in New York

The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who anxious that high oil and gasoline prices would be politically painful ahead of midterm elections later this year.

While OPEC's largest producer, Saudi Arabia, is seen to be open to higher production, Iran has been hesitant because of its trouble to increase output and tensions with the U.S. President Donald Trump has been calling publicly for the cartel to help lower prices. Crude prices in NY rose more than 3 percent to nearly $68 a barrel and rose about 2 percent in London to more than $74 a barrel.

The Organization of the Petroleum Exporting Countries agreed in principle on Friday to raise output enough to match a production target it introduced at the beginning of 2017, but which it has undershot ever since. They will discuss with OPEC on Saturday on whether to increase their own production.

The price of oil jumped after the announcement, with the worldwide benchmark, Brent, gaining 2.5 per cent to US$74.84 a barrel in London, and United States crude climbing 4.9 per cent to US$68.72 a barrel in afternoon trading in New York-on track for its biggest one-day rise since OPEC agreed in November 2016 to cut production.

"There was a lot of anticipation in the market that there was going to be a lot of new oil coming to market, and that isn't going to happen, at least for now", said John Kilduff, a partner at Again Capital.

"But this does not mean that Venezuela's production should be produced by some other". Alongside this, the increase in output will likely be easily absorbed by the market and is not going to tip the oil balance into negative territory, which could allow for oil prices to grind higher. The figure has been inflated by a plunge in supplies from almost bankrupt Venezuela.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018 and that OPEC's responsibility was to address consumers' worries.

OPEC's deal to release more supply centres on returning to 100 percent compliance with existing, agreed cuts.

Zanganeh has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 bpd.

"Both Saudi and Iran can show that they won", an OPEC delegate said.

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