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Russia, OPEC, and other non-member countries agreed to raise oil production by one million barrels a day in a meeting in Vienna. The development, coming after bilateral meetings at the World Cup celebration in Moscow, Russia, is a victory for Vladimir Putin, which will enjoy increased oil revenue, Saudi Arabia, and the foreign policy of Donald J. Trump. The American leader has pushed for lower oil prices to
Iran opposed the production increase as under reimposed sanctions the Islamic theocracy will not be able to sell any crude.
“Expecting a large oil deficit in the second half of this year – due to outages in Venezuela and Libya – as well as calls from top consumers to cool down prices, consensus among the group is to raise production by a combined 1M barrels per day,” reported Oilprice.com.
“Saudi Energy Minister Khalid Al-Falih told reporters in Vienna that an agreement had been reached for a “nominal” production increase of one million barrels per day (bpd). In reality, production will rise only by 700,000 bpd as some OPEC members are unable to boost production at the moment. Oil prices rose following the news, with Brent crude trading at $74.69 per barrel (+$1.65), while the US West Texas Intermediate gained almost $2, trading at $67.53. The agreement is set to help increase supply in the oil market without creating a glut. “The effective increase in output can easily be absorbed by the market,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas,” told Reuters.
“It will be enough for now but not enough for the fourth quarter to address a decline in Iranian and Venezuelan exports,” said Gary Ross, head of global oil analytics at S&P Global, as quoted by Reuters.
“There isn’t a lot of spare capacity in the world. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? We are in for higher prices for longer,” he said.