Opec edges closer to raising oil output, Iran’s nod is key

Vienna: Opec edged closer on Thursday toward raising oil output, with Iran softening its opposition to an increase and Saudi Arabia warning of supply shortages and price rallies if production remained stable.

A production rise of about 1 million barrels per day (bpd) or around 1% of global supply was emerging as a consensus for the group and its allies, Opec sources told Reuters, adding that Iran could agree under certain conditions.

The Organization of the Petroleum Exporting Countries meets on Friday to decide output policy amid calls from top consumers such as the United States, 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 bpd. Saudi Energy Minister Khalid al-Falih said on Thursday the world needed at least an extra 1 million bpd to avoid a shortage in the second half of 2018.

Opec and its allies have since last year been participating in a deal to cut output by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and lifted oil LCOc1 to around $ 73 per barrel from as low as $ 27 in 2016.

But 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 US 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 US President Donald Trump to pump more oil.

But on Wednesday, Iranian Oil Minister Bijan Zanganeh said Opec members that had overdelivered on cuts in recent months should comply with agreed quotas.

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

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

Falih said 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.

“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. He said the exact mechanics of any increase would be decided among all Opec members on Friday.

Three Opec sources said ministers would debate on Thursday whether to raise supplies by 1 million bpd as the main proposal for the meetings of Opec and its allies on Friday and Saturday.