Published: Sat, June 23, 2018
Business | By Tara Barton

OPEC to boost oil production by 1 million barrels per day

The effective increase in supply, due to crunch in other nations like Venezuela, could be 770,000 bpd, which is less than half the amount OPEC reduced in supply in 2017.

OPEC and partners including Russian Federation and Oman have since previous year cut output by 1.8 million bpd. Crude prices in NY rose more than 3 percent to nearly $68 a barrel and rose about 2 percent in London to more than $74 a barrel.

The output gain is nominal.

World shares rose on Friday but stayed on track for their biggest weekly decline in three months as global trade tensions continued, though oil prices surged after OPEC decided on a modest production increase. The figure has been inflated by a plunge in supplies from almost bankrupt Venezuela.

The output boost agreed on Friday had been largely priced into the market and was seen as modest. Saudi Arabia and Russian Federation said they were happy to pump more but Iran had criticized the idea as it faces export-crippling U.S. sanctions.

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The decision was arrived at after a meeting by representatives of member countries, on Friday [June 22, 2018]. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? Apart from the OPEC meet market will also take cues from movement of dollar index, recent strength in dollar index from 92/93 to 95 has pressured oil prices and now dollar index is approaching a resistance area of 95.50/96 and has turned lower from there towards 94.50 which could provide support to oil prices and we could expect a pullback rally. "As individual countries, it is challenging", said United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui. The group said compliance reached 152 percent in May 2018, which means OPEC was cutting about 600,000 bpd more than it intended.

In practice, only Saudi Arabia and Russian Federation have the capacity to add significant amounts of crude in the next few months.

"Zanganeh can go back to his country and say "I won", because we are keeping the original agreement unchanged".

"There was a lot of anticipation in the market that there was going to be a lot of new oil coming to market, and that isn't going to happen, at least for now", said John Kilduff, a partner at Again Capital. "OPEC is set to hold the next biannual meeting on 3 December", wrote analysts at Danske Bank.

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