OPEC is scrambling to reach a deal over production policy amid heightened political tensions between some member states.
Energy ministers have been laying the groundwork all week for Friday’s biannual meeting in Vienna, Austria, where OPEC is expected to ease supply constraints that have been in place since January 2017.
De-facto OPEC leader Saudi Arabia and non-member Russia are both calling on major suppliers to ramp up production after 18 months of tight output controls. But Iran and other exporters have expressed opposition to such a deal, with Tehran even threatening to veto the Saudi proposal.
The prospect of the meeting ending without an agreement remains a possibility just hours before a final decision is due to be made, with Iran’s oil minister saying late Thursday that he did not believe OPEC could reach a consensus on a path forward.
“Obviously, Iran feels like they are doing a deal that is going to facilitate aggressive U.S. policy against them,” Jason Bordoff, who was a senior energy adviser to President Barack Obama and is now director of Columbia University’s Center on Global Energy Policy, told CNBC on Friday.
On Thursday, Saudi Energy Minister Khalid al-Falih said that the world is likely to face a large deficit of oil in the second half of 2018. As a result, OPEC needed to increase production by a combined 1 million barrels per day (bpd), he added.
Industry sources familiar with the oil cartel’s deliberations said the actual increase is likely to total around two-thirds of Saudi Arabia’s lofty target. That’s because some OPEC members would be unable to sufficiently ramp up crude production.
Analysts say supply increases are more likely to fall in a range between 600,000 to 800,000 bpd. Still, that is substantially lower than the 1.5 million bpd increase sought by Russia, which is not a member of OPEC but has been coordinating policy with the group for the last 18 months.
OPEC’s agreement with Russia and other producers to limit oil output has helped to clear a global supply overhang that weighed on prices for years. But with crude futures recently soaring to multi-year highs on strong demand, dwindling output from Venezuela and renewed U.S. sanctions on Iran, energy ministers are worried about the market overheating.
Ahead of Friday’s meeting, major oil importers like India and China have expressed alarm at the rising cost of crude.
International benchmark Brent crude stood at around $74 a barrel Friday morning, recovering from lows of $27 a barrel in 2016.
“(OPEC) is worried not just about China and India but President Trump’s Twitter account getting upset about oil prices again” Bordoff told CNBC.
The U.S. president has sought to publicly intervene in OPEC’s policymaking ahead of a key meeting for the 14-member oil cartel on Friday, complaining in a pair of tweets that the Middle East-dominated group is to blame for crude prices recently soaring to multi-year highs.
Source: cnbc
OPEC heads into showdown over oil output, with Saudi Arabia and Iran on different sides