Opec debating compromise output boost, say sources, Business News & Top Stories

Oil pumps are seen in Lake Maracaibo in Lagunillas Ciudad Ojeda in the state of Zulia Venezuela

OPEC members are set to meet later this week in Vienna to discuss the proposal by Saudi Arabia to end the OPEC/non-OPEC deal to balance the oil market and increase the oil price.

The move would effectively wipe out existing production cuts of 1.8 million bpd, which have helped rebalance the market in the past 18 months and lifted oil prices to almost $80 per barrel from as low as $27 in 2016.

The market was expecting an increase of around 1-1.5 million barrels.

Commerzbank commodities analyst Carsten Fritsch said that given big differences in the positions of OPEC members, the Friday meeting was likely to be tough.

OPEC is up for a tough meeting in Vienna this week after the leaders of the two groups of the OPEC/NOPEC production cuts-Saudi Arabia and Russia-have signaled that they are willing to boost production to offset what is sure to be further supply disruptions, mostly from Venezuela's collapsing oil industry and from a potential decline in Iran's oil exports in view of the returning US sanctions.

Iran, however, said OPEC was unlikely to reach a deal on oil output this week, setting the stage for a clash with Saudi Arabia and Russian Federation, which are pushing to raise production steeply from July to meet growing global demand.

The willingness of the Saudis to do more than ensure the market remains balanced may be disciplined by their own finances - the production limits and consequent higher prices have stemmed the haemorrhaging of their own public finances that occurred when oil prices plunged. "This could make a huge dent in the U.S. bid to export oil", he added.

This faction is reportedly also supported by Iraq. It said China takes around 20% of all USA crude exports.

Agreements are never easy for the oil cartel, but oil-market watchers say even if the cap is lifted, spare global capacity to produce more oil is limited, which means for the first time in many years the oil market may be at the mercy of potential supply shocks or geopolitical tensions rattling prices.

Tankers waiting to load more than 24 million barrels of crude, nearly as much as state producer PDVSA shipped in April, are sitting off the Opec member's main oil port. Shortly after, since the USA shale production wasn't able to offset the production cuts that OPEC and non-OPEC nations made, oil prices rose significantly through 2017 up to 2018 and that made the Trump administration anxious about the effect of higher prices on Trump's political stance.

While Iran said on Sunday it was opposed to any increase to current quotas, officials from a number of other countries are optimistic that an agreement can be won for a relatively modest hike at this week's meeting in Vienna, the people said, asking not to be named.

For Opec, the next move will be to consider to return to a compliance ratio of 100 per cent of the agreed production cuts of 1.8 million barrels per day in 2016.

"This renewed commentary by Novak that they're looking for 1.5 million bpd of production is putting downward pressure on prices in a significant manner". Well, we have to wait until the price reaches the 50 SMA, don't we?

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