Published: Fri, June 22, 2018
Business | By Tara Barton

Energy Stocks To Watch Ahead Of OPEC Meetings

Energy Stocks To Watch Ahead Of OPEC Meetings

OPEC energy ministers expressed optimism Thursday they were nearing a compromise on oil output policy, with Saudi Arabia acknowledging that a big production hike would be "politically unacceptable" to archfoe Iran.

A production increase of about 1 million barrels per day (bpd) or around 1 percent of global supply was emerging as the key proposal for the group and its allies, OPEC sources said, adding that Iran's assent was vital for any agreement.

"We hope that there will be an agreement", Iraqi Oil Minister Jabbar al-Luaibi told reporters.

The market is now under "OPEC-Watch" with numerous major players on the sidelines until the cartel along with Russian Federation makes its decision about production rates at its meeting in Vienna on June 22-23.

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.

The only route to a production boost that Iran has publicly suggested - allowing the handful of countries that have voluntarily cut deeper than necessary to restore some output - would deliver far less extra oil to the market than the Saudi proposal.

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

After a day of diplomatic back-and-forth, ministers were increasingly positive on Thursday that a deal was within reach.

India is Iran's biggest oil client after China.

Iran is usually not part of the committee, which groups Russia, Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Algeria and Venezuela.

Friday's meeting could be a tense affair. Some Iranian officials remained inside the meeting after Zanganeh left.

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For Opec, over-compliance with its supply-cutting deal is a nice problem to have.

Brent crude dropped $1.12 to $73.62 a barrel by 1:57 p.m. EDT after earlier hitting a session low of $72.94.

Some analysts believe that Saudi Arabia needs a Brent price closer to $90 to cover its domestic spending but is feeling pressure from the United States to head off rising prices by boosting output. Iran's output is also likely to fall in the second half of this year due to the new USA sanctions.

"OPEC is listening to consumers", Bob Dudley, the chief executive of BP Plc, said on the sidelines of the OPEC conference in Vienna.

"While China could secure the crude from alternative sources, such as West Africa which has a similar quality to USA crude, the US would find it hard to find an alternative market that is as big as China", Suresh Sivanandam, senior manager, Asia refining, at Wood Mackenzie, said earlier this week, commenting on the impact of possible Chinese tariffs on USA oil imports.

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Falih said the exact mechanics of any increase would be decided among all OPEC members on Friday.

"It would seem that an aggregate increase in production for OPEC+ of between 500,000 bpd and 1 million bpd is the range that is being considered", Tchilinguirian said. "This puts Saudi Arabia in a tough position, as unanimity is needed for any accord to be reached", it added.

WTI briefly turned positive earlier in the session after energy information provider Genscape said crude inventories at the key Cushing, Oklahoma hub were expected to have dropped by 2.3 million barrels in the week since Tuesday, traders said, alleviating some concerns that surging USA production would outstrip demand.

"OPEC is not the place to discuss political issues or bans". "And I don't think they'd want to press their situation and cause too much trouble".

Markets are also anxiously watching trade tensions between the United States and China, in which both sides have threatened to impose stiff duties on each other's exports, including USA crude oil.

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