Iran, other dissenters complicate OPEC oil output boost -sources
At least three OPEC members disagree with Saudi Arabia and Russia on the need to pump more oil, OPEC sources said, complicating any official decision to boost supply just as consuming nations are warning of a shortage.
In attempt to bridge differences, OPEC and its allies are looking at a number of options around pumping more oil, including a token increase and delaying the start of any production boost, OPEC delegates say.
After almost 18 months of an OPEC and non-OPEC deal to cut production, Saudi Arabia and Russia have said they are prepared to pump more to calm consumer worries about supply and prices, which hit $80 a barrel, the highest since 2014.
But Iran, the arch-rival of Saudi Arabia, plus Venezuela, Iraq and smaller producers in the 14-member Organization of the Petroleum Exporting Countries disagree. Producers meet on June 22-23 to set policy.
The disagreement has revived memories of a 2011 meeting that former Saudi oil minister, Ali al-Naimi, called one of the group’s worst ever – talks collapsed when a majority of members refused to endorse a Saudi push to pump more. Saudi Arabia, in the end, unilaterally raised output.
Those against an increase this time are concerned it would threaten the unity of the 24-nation alliance involved in the deal and say forecasts from OPEC and others calling for higher demand in the second half of 2018 are too optimistic.
“Changing the decision is very complicated,” an OPEC source said. “Iran, Iraq and Venezuela and some more countries are going to push for keeping the ceiling for OPEC in place until the end of 2018.” The source did not say which other countries oppose pumping more.
Another source thought a supply boost will be agreed eventually, but a modest one.
“I believe there will be a marginal increase,” a second OPEC source said, adding it would have to be “gradual, well calculated and for its impact on the market to be reviewed.”
Consumers say more oil is needed. U.S. President Donald Trump renewed his attack on OPEC on Wednesday, and the International Energy Agency said the world may face a supply gap by late 2019 if OPEC cannot cover any shortfalls.
Russian President Vladimir Putin plans to meet Saudi Crown Prince Mohammed bin Salman when he visits Russia for the opening of the soccer World Cup, and the two would discuss the oil deal, the Kremlin said on Wednesday.
Venezuela’s output has collapsed due to economic crisis and could fall further due to U.S. sanctions, while Iran is facing a cut in exports after the U.S. quit a nuclear deal with Tehran.
“Those who oppose the increase are the ones who will not gain,” a second OPEC source said. “They will lose when prices go down because they will not be able to increase production and will get less revenue.”
Gulf producers Saudi Arabia, Kuwait and the United Arab Emirates are the main OPEC members holding sufficient unused oil production capacity to boost output quickly to offset a shortage.
Sources close to the matter said a number of options are being looked at, including an increase of around 1 million barrels per day and, should prices fall, making no decision.
Arab oil ministers who met in Kuwait earlier this month agreed that if there is a decline in prices towards the $60s, then OPEC would keep the deal in place until its next meeting in November, two sources familiar with the matter said.
Another scenario being discussed is for producers to ease the level of cutbacks to 100 percent of the agreed level from around 150 percent now, to fill any supply gap from Venezuela and Iran, should oil get close to $80, the sources said.
In a further effort towards building consensus, the amount of any increase would be distributed among all even though only three or four producers actually have the capacity to increase output, one of the sources familiar with the matter said.
And a fifth OPEC source said that if OPEC decided next week to raise output it would not be with “immediate effect” and would be gradual, suggesting supply would not rise for three to four months after a June decision.
Source: Reuters (Editing by David Evans)