Iran signals compromise for modest rise in OPEC crude oil output

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OPEC agreed on Friday on a modest increase in oil production from July after its leader Saudi Arabia persuaded arch-rival Iran to cooperate amid calls from major consumers to help reduce the price of crude and avoid a supply shortage.

Zanganeh said it was Trump who had created difficulty for the oil market by imposing sanctions against Iran and Venezuela yet he now expects OPEC to deal with the consequences by pumping more.

US oil production is expected to rise by 1.4 million bpd in 2018 and another 1.1 million bpd in 2019 but may not be able to rise much faster because of pipeline bottlenecks. Assuming that the main production continues, that will continue to drive inventories down, we think that that would be, you know, probably too short of a supply situation, that we can not allow to happen.

- But in practice it would mean a boost of less than a 10th of that amount, effectively from Saudi Arabia.

"Every decision in OPEC needs unanimity, and I don't believe in this meeting we can reach agreement", Iranian Oil Minister Bijan Zanganeh told reporters on Tuesday.

A production rise of about 1 million bpd was emerging as a consensus, OPEC sources told Reuters on Thursday, adding that Iran could agree to that under certain conditions.

But the agreement failed to announce a clear target for the output increase, leaving traders guessing how much more OPEC will actually pump.

Mr Zanganeh was due to attend a ministerial committee on Thursday, two sources said.

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After an OPEC meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel made a decision to fully comply with its existing production ceiling.

The intensive negotiations between ministers in Vienna this week are the culmination of a process that has whipsawed oil markets for weeks. Some OPEC members have been opposed to a production increase, and others don't want to go as far as Saudi Arabia.

An import duty would make US oil less competitive than other crudes, nearly certainly resulting in a sharp fall of Chinese purchases, forcing USA oil firms to find other buyers. Oil production by state-run ONGC stood at 1840.93 TMT during the month, which is 4.82 per cent lower when compared to May 2017 production. "Probably it will end up being somewhere lower, at around 600,000 barrels a day".

OPEC operates on the principle of consensus, and Iran has already signalled it could veto attempts by other cartel members to offset its expected production losses as a result of the upcoming United States sanctions.

The outcome of that meeting could give oil users around the world a strong indication as to whether they face the prospect of rising prices later this year - possibly as high as $100 a barrel - or more plentiful supply that would ease the cost of gasoline and diesel.

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

"You think about 1 million bpd coming back online ... it's not going to happen instantaneously, it's going to take time", said Brian LeRose, the senior technical analyst at ICAP.