Major oil producers met in Vienna last week to discuss a proposal to increase production following a rise in prices.
â€¨Russian Energy Minister Alexander Novak confirmed Saturday his country’s support for Saudi Arabia’s plan to raise crude production by 1 million barrels per day starting in July.
This figure is far lower than the 1.5 million barrel a day increase Russia had been gunning for, and sources close to the matter say the actual amount is more likely to be around 600,000 (because not all nations are able to increase output).
OPEC, Russia, and 9 other producers in 2017 decided to cut production by 1.8 million barrels a day following a supply glut that wounded the economies of major oil producing nations. Thanks to larger-than-expected cuts by Saudi Arabia and production outages in countries like Venezuela, compliance with the deal has reached 150%.
“Non-OPEC countries have made the decision to join OPEC in reducing [compliance] with the deal” to 100%, said Novak.
Saudi Arabian Oil Minister Khalid al-Falih pointed to the rising price of Brent crude, which exceeded $80 last month for the first time in three years, as proof the supply glut is over. Falih promised a “measurable” increase in production, but did not provide specific numbers. “We already mobilized the Aramco machinery, before coming to Vienna, pre-empting this meeting.”
Oil prices have increased more than 40% since OPEC’s deal took effect in 2017, and the price of Brent climbed 3% immediately after the organization announced its decision to increase production.
President Trump, who has repeatedly blamed OPEC for the price increase, said on Friday he hoped the organization would “increase output substantially.” China and India have also urged OPEC to increase supply in order to prevent an oil deficit that could undermine the global economy.
Oil Ministers from Russia and Saudi Arabia made it clear that pressure from Trump did not influence their decision to increase output. “It is obvious that we are not being driven by tweets but base our actions on deep market analysis,” said Novak.
Iran, on the other hand, insists the rise in crude occurred only after Trump reimposed sanctions on Iran and Venezuela.
Iranian Oil Minister Bijan Zanganeh suggested that only countries which had produced less than their allocation will be able to produce more, but Falih made it clear Saudi Arabia was ready and willing to make up for any gaps.
“Some of the countries…are not going to be able to produce, so the others will. And that implies there will be indirectly a reallocation,” said Falih.
Author’s Note: OPEC’s deal means the price of oil and gas will go down again.
Oil producing nations are struggling to get prices up with volume in order to increase their profits (and run their failing socialist economies), but the market forces are keeping them from manipulating to the degree they want to.
Editor’s Note: If Trump realizes his campaign promise of becoming a net energy exporter, then the nonsense of Americans riding the OPEC rollercoaster will cease.