OPEC's Increased Output Helps U.S. Shale Companies

OPEC's Increased Output Helps U.S. Shale Companies

OPEC's Increased Output Helps U.S. Shale Companies

The only way that OPEC as a group can possibly bring compliance with the deal agreed in November 2016 to 100 per cent - it was 164 per cent as of May, according to OPEC's own figures - is for countries with spare production capacity to pump more oil.

Al-Falih went out of his way to give a detailed explanation of how the so-called OPEC+ deal will work, clarifying a vaguely worded agreement and contradictory statements from other ministers that spurred a rally in crude futures on Friday.

As tensions mounted, the Iranian and Saudi ministers huddled for bilateral talks on Friday morning, holding up the start of the closely watched OPEC meeting. That's because some OPEC members would be unable to sufficiently ramp up crude production.

Still, some analysts believe that a combination of the OPEC deal, U.S. oil, and an easing of American demand for energy should eventually contribute to lower oil prices, which in May hit their highest levels in more than three years. West Texas Intermediate, the USA benchmark for the price of oil, was up 3.4 percent to $67.75 per barrel.

Taking a somewhat different stance, Russian Energy Minister Alexander Novak said Saturday's endorsement to increase oil production was based on "fundamental principles, on research done by our teams, by teams of our friends and colleagues, the OPEC secretariat".

Ministers from the Organization of Petroleum Exporting Countries are meeting in Vienna for a regular meeting. The ministerial monitoring committee, which includes six countries - Saudi Arabia, Russia, Kuwait, Venezuela, Oman and Algeria, in turn, makes recommendations to the OPEC+ meeting in large numbers, which is held on June 22-23. Oil prices LCOc1 rose by $1.85 to $74.90 a barrel.

"Investor sentiments are shifting and they're no longer expecting a 1 million barrel a day rate hike", Benjamin Lu, a commodities analyst at Phillip Securities Singapore, told AFP.

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Global marker, Brent, traded above US$100 a barrel for several years until 2014, dropping to nearly US$26 in 2016 and then recovering to over US$80 last month.

"I agreed to have 100 percent of compliance, not more", Iran's Zanganeh said as he left OPEC headquarters on Friday.

Venezuela, in the throes of an economic crisis, is also opposed to easing the cartel's output curbs, as are several other countries, including Iraq and Nigeria, who would struggle to immediately increase production. Iran said the real increase could amount to as little as 500,000 bpd.

As Trump's sanctions begin to bite in the coming months, Iran's production will also fall - and probably much more so than Venezuela's.

Saudi Arabia and Iran stood side by side, and proved that politics can take a back seat when it comes to serving the best interests of OPEC members.

He also said OPEC could hold an extraordinary meeting before its next formal talks due on December 3 or adjust deliveries in September, when its monitoring committee meets, if global oil supply fell further because of sanctions on Iran.

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