OPEC will seek agreement on Friday to raise oil production despite opposition from Iran, which has threatened to block the move as it faces export-crippling US sanctions.
OPEC’s de facto leader Saudi Arabia and non-OPEC Russia have said a production increase of about 1 million barrels per day (bpd) or around 1 percent of global supply had become a near-consensus proposal for the group and its allies.
The Organization of the Petroleum Exporting Countries will be gathering in Vienna amid calls from top consumers the United States, China and India to cool down the price of crude and prevent an oil shortage that would hurt the global economy.
“It will be a hard meeting today. I wouldn’t say all will accept the 1 million bpd proposed,” an OPEC delegate said, adding the group could agree on a lower figure.
Iran, OPEC’s third-largest producer, has so far been the main barrier to a deal as it called on OPEC to reject pressure from US President Donald Trump to pump more oil.
Trump imposed fresh sanctions on Tehran in May and market watchers expect Iran’s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike arch-rival Saudi Arabia.
“I don‘t think we can reach agreement,” Iranian Oil Minister Bijan Zanganeh said on Thursday.
Saudi Energy Minister Khalid al-Falih said the overwhelming majority of producers had recommended raising output by 1 million bpd, gradually and on a pro-rata basis.
OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and lifted oil to around $ 74 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.
Brent oil prices were up 1 percent on Friday.
Falih has warned 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.
Earlier this week, Zanganeh left the door open for a deal, saying OPEC members that had overdelivered 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 voluntarily cut more deeply than planned.
Zanganeh has said that if OPEC returned to regular compliance, the group would raise output by around 460,000 bpd.
Falih also said the real increase would be smaller than the nominal gain of 1 million bpd, meaning a compromise with Iran remained possible.
OPEC sources also said Iran had demanded that US sanctions be mentioned in the group’s post-meeting communique, as Tehran has blamed US measures for the recent rise in oil prices.
The United States, which rivals Russia and Saudi Arabia for the position of world No.1 oil producer, is not participating in the current supply pact.