Saudi Arabia Inching Towards Pro-Nigeria Compromise Ahead Of OPEC Meeting

Reuters reported that the reinstitution of usa sanctions in November could cut Iran's oil output of almost 4 million barrels a day by a third. Saudi Arabia's proposal for 1 million bpd likely would result in an actual increase of 600,000-800,000 bpd as some members like Venezuela are unable to ramp up, sources told CNBC.

Iraq's energy minister said it was clear that Opec and its allies would change course after 18 months of production curbs, in an effort to rebalance crude supply and demand.

"The actual effect will be something less because not every country can respond", Saudi Arabia Energy Minister Khalid Al-Falih said.

Volatility was the theme on Wednesday as bearish traders continue to support the notion that Saudi Arabia and Russian Federation would push for at least a 1 million barrel per day increase in production, while bullish investors priced in opposition to the increase by Iran, Iraq and Venezuela.

The Iranian publication Seda quoted anonymous sources as saying Zanganeh told the other producers that the proposed increase would pave the way for cuts in Iranian oil output that are likely to result from a reimposition of USA sanctions against Iran in the fall. Trump has been lobbying OPEC to help lower prices.

But Iran has called on the group to resist pressure from U.S. President Donald Trump, who moved to reimpose sanctions on Tehran last month after announcing he would pull the United States out of Iran's nuclear agreement with world powers.

Falih said the oil market had now rebalanced and his aim was to prevent a shortage of crude in future that could squeeze the market.

"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 Global Oil Forum.

Crude oil prices are trading lower early Thursday, but inside yesterday's range.

"It would seem that an aggregate increase in production for OPEC+ of between 500,000 bpd and 1 million bpd is the range that is being considered", Tchilinguirian said.

Once known for rampant cheating on agreed oil output targets, Opec has been over-delivering on a pact in place since January 2017, cutting around one and a half times the promised amount.

The 24 nations in the pact, known as OPEC+, are now keeping more than two million bpd off the market.

He was echoing comments from his Iranian counterpart, Bijan Namdar Zanganeh, who had rejected any production increase when he arrived in Vienna on Tuesday, saying OPEC shouldn't be doing Trump's bidding.

Falih also said the real increase for OPEC and non-OPEC would be smaller than the nominal gain of 1 million bpd.

Asked whether he thought the 14 OPEC ministers gathering in Vienna would reach a unanimous agreement on whether and how to amend the landmark deal, Iraqi Oil Minister Jabbar al-Luaibi replied: "No".

"This puts Saudi Arabia in a tough position, as unanimity is needed for any accord to be reached", it added.

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