After a meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel decided to fully comply with its existing production ceiling.
Here’s how different experts reacted to the marginal rise in oil output:
Devendra Kumar Pant, Chief Economist, India Rating and Research
Opec and non-Opec countries agreed to increase crude supply by 1 million barrel per day. While supply is likely to increase, however actual supply increase would depend on how quickly oil supplies especially from oil producing countries such as Venezuela, Libya and Iran will come back to normal and will have impact on prices. The trade war between US and China if results in China sourcing crude from Iran, the global crude oil supply-demand balance will may balance out. The crude oil prices has already reacted in last couple of days in expectation of supply increase post 22 June meeting
Joe Mcmonigle, Energy Analyst at Hedgeye Risk Management
I’m not sure it’s a victory for Iran. They were kind of isolated here. To the extent they get the blame for higher prices, it’s not welcome news for their customers, especially those who have signalled they will continue buying from them despite U.S. sanctions.
Nitesh Shah, Director, Research, Wisdomtree
Opec has once again under-delivered. The impact should be price positive. All they agreed to was to get back to 100 per cent compliance at the group level i.e. 1.2 million bpd less than October 2016 production levels. That barely moves the mark on aggregate OPEC levels of production.
Oil markets should remain tight as a result. They were very elusive on actual figures and seem to have abandoned individual country targets. No information on who will make up for the shortfall was announced. Markets were expecting larger production increases. Prices should rise as a result.”
Gary Ross, Head Of Global Oil Analytics, S&P Global
The real rise in supply for OPEC and non-OPEC will probably be around 700,000-750,000 bpd (barrels per day). It will be enough for now but not enough for Q4 to address a decline in Iranian and Venezuelan exports.
Plus there isn’t a lot of spare capacity in the world. If we lose a million bpd of output from Venezuela and Iran in Q4 where will all these barrels come from? We are in for higher prices for longer.
Harry Tchilinguirian, Head Of Commodities Strategy, Bnp Paribas
The effective increase in output can easily be absorbed by the market and is not going to tip the oil balance into negative territory. So I suspect the market will continue to grind higher, notably in view of oil inventories in the OECD being below the famous five-year average target and the ever present risk of supply outages in Venezuela and Libya. And eventually, there will be some shuttering of supply in Iran as U.S. start having a negative impact on the country’s exports.
Ole Hansen, Senior Manager, Saxo Bank
In the short term we are likely to see crude oil being supported by continued geo-political risks related to supply concerns from Venezuela and not least Iran as the deadline for the implementation of U.S. sanctions approaches.
These concerns may, however, eventually be replaced by a shifting focus towards a continued rise in non-OPEC supply and not least demand growth, which may begin to suffer due to a slowdown among emerging market economies.
Barclays Commodities Team
OPEC was likely to agree to raise output but the increase is slightly more than we assumed. Based on our previously published balance, we expect OPEC crude output to increase by about 700,000 bpd by the end of the year, assuming Libya’s oil output can rebound to 900,000 bpd. This agreement is consistent with those expectations, though we see a slight upside risk in Saudi, UAE, and Kuwaiti output expectations compared with our balance.
Olivier Jakob, Strategist, Petromatrix
Going into the real OPEC meeting today (followed by OPEC+ tomorrow), the recommendation to the members after longer than expected discussions and debates yesterday is for a formal increase of +1.0 million bpd to be split with some pro-rata calculations which will result in a real increase anywhere between 500-700,000 bpd. Iran is, however, not fully clear on allowing a formal consensus as it tries to push its acceptance of it with a formal condemnation of the U.S. sanctions.