For Saudi Arabia and non-OPEC Russia, it has almost become a near-consensus proposal that oil production would be increased by about 1 million bpd, or around 1% of the global oil supply.
Apparently, Saudi Arabia has been able to convince arch rivals Iran to cooperate into increasing oil output following stiff warnings from major oil consumers of an impending oil shortage.
Following issuances of possible supply shortages of oil from the United States, China and India while also appealing to get down global oil prices and stop the global economy from being nit by an oil deficit, the Organization of the Petroleum Exporting Countries, or Opec, is slated to meet in Vienna to discuss the issues. IN the past Opec has agreed on production decisions without the participation of Iran even though the theoretically, its decision on production requires the agreement of all members. Iran has been against the proposal of increasing production output because it is faced with an impeding sanction from the US.
“We are cooking something,” Iranian oil minister Bijan Zanganeh told reporters after meeting Saudi energy minister Khalid al-Falih before the Opec talks.
Opec has been called not to pay heed to calls from US President Donald Trump to increase oil production by Iran which is the third-largest producer of Opec and this has so far created a barrier for production increase.
Following the announcement of fresh sanctions by Trump after he took the us out of the Iran nuclear deal in May, experts believe that Iran would have to cut down on production by two thirds by the end of 2018. And therefore, there is little incentive for Iran to increase production output in contrast to what the other oil producers have to gain.
Majority of Opec members have agreed to recommendations that increasing oil output by 1 million bpd, would be logical but should be done in a gradual and a pro-rata basis, Falih said.
Opec and some of the other oil producers have reduced oil output by 1.8 million bpd since last year. that strategy has helped to reduce the global glut in oil and raise international oil prices to around $74 per barrel from as low as $27 in 2016.
However, the effective supply cuts in oil has reached around 2.8 million bpd in recent months because of unexpected shortage in production in in Venezuela, Libya and Angola.
There has been a history of clashes within the Opec with tensions Iran and Saudi Arabia.
It is Opec’s responsibility to reduce worries of its customers, Falih has said while warning that a supply deficit of up to 1.8 million bpd could be faced by the world in the second half of 2018.
“We want to prevent the shortage and the squeeze that we saw in 2007-2008,” Falih said, referring to a time when oil rallied close to $150 per barrel.
(Adapted from LiveMint.com)