Saudi Arabia urged OPEC to help consumers by boosting oil supply as opposition from arch-rival Iran showed signs of wavering. The oil markets have been on spotlight due to the intensive negotiations between ministers in Vienna. Iran and Venezuela as they have shown disapproval towards Arabia and Russia’s desire to roll back production cuts. On the other hand, United States President, Donald Trump has lobbed the occasional rhetorical bomb at the cartel on behalf of consumers. Furthermore, the odds of the Organization of Petroleum Exporting Countries reaching a deal on Friday drastically increased.
Iran has edged away from a threat to veto any agreement that would raise output levels, while Saudi Arabia has put forward a plan that would add 600,000 barrels a day. OPEC and its allies could partially offset the impact of the collapse in Venezuela’s oil industry and feed fast growing demand if the Saudi position prevails. Looking back into last month, these factors have rallied Brent crude to above $80.
As far as intensive talks go, ministers believe the deal is on track to achieve its goal. 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. The proposal revolves around a complex calculation based on how much the group has cut production beyond the initial target of 1.8 million barrels a day set in 2016. In theory, many countries that have cut the deepest can’t increase production. This would translate to 600,000 barrels a day of crude flowing back into the market. This proposition has yet to win the backing of all OPEC members and may also meet resistance from nations that have limited scope to increase production like Venezuela, Algeria and Iraq. Investors should note that the outcome of the meeting could potentially give oil users around the world a strong indication as to whether they face the prospects of rising prices later this year or even a more plentiful supply that could ease the cost of diesel and gasoline.