June 21, 2018

OPEC’s leader Saudi Arabia and Russia were trying on Thursday to convince fellow oil producers to raise output from July to meet rising global demand, with Iran still signaling it would support only a modest increase in supply.

The Organisation of the Petroleum Exporting Countries would meet on Friday to decide output policy amid calls from top consumers such as the U.S., China and India to cool down oil prices and support the world economy by producing more crude.

Russia, which is not in OPEC, has proposed producers raise output by 1.5 million barrels per day (bpd).

Saudi Energy Minister Khalid al-Falih said the world needed no less than an extra 1 million bpd to avoid a shortage in the second half of 2018.

For graphic on OPEC compliance in May

OPEC and its allies have since 2017 been participating in a deal to cut output by 1.8 million bpd.

The measure has helped re-balance the market in the past 18 months and lifted oil LCOc1 to around 73 dollar per barrel from as low as 27 dollar in 2016.

However, unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

Iran’s output is also likely to fall in the second half of this year due to new U.S. sanctions.

Iran, OPEC’s third-largest producer, has so far been the main barrier to a new deal as it said on Tuesday OPEC was unlikely to reach an agreement and should reject pressure from U.S. President Donald Trump to pump more oil.

Meanwhile, on Wednesday, Iranian Oil Minister Bijan Zanganeh said OPEC members that had over-delivered on cuts in recent months should comply with agreed quotas.

That would effectively mean a modest boost from producers such as Saudi Arabia that have been voluntarily cutting more deeply than planned.

“An increase is acceptable if justified from the demand side and if it is agreed by all OPEC members. An increase because of external pressure on OPEC is not acceptable,” said a source familiar with Iranian thinking.

Ecuador said OPEC and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd.