Exactly how much OPEC will increase the oil production is still a question mark. However, OPEC ministers announced a deal that is likely to add around 600,000 to 800,000 barrels a day to the market. That would be the first increase oil supplies from the producer group ever since the cartel cut production of 1.8 million barrels a day about 18 months ago.

 

The agreement was reached after a week of tense negotiation at OPEC’s headquarters in Vienna, Austria. It was not a walk in the park though. The cartel leader – Saudi Arabia – was reportedly struggling to convince reluctant producers such as Venezuela, Iraq and of course, Iran. The OPEC members agreed to cut no more than 1.2 million barrels.

 

While the official decision is yet to be announced, sources said OPEC would release about 1 million barrels to the market. However, because not all members could ramp up production, analysts believe only 600,000 to 800,000 barrels could be flooded. OPEC, however, did not say which of its members would supply the additional crude.

After OPEC members reached the agreement, they will discuss the output changes with the 10 other allied countries that signed the 2016 agreement on Saturday – including world’s biggest producer Russia. The OPEC, Russia and several other producers began to reduce supply in January 2017 in an attempt to erase a glut.

 

The supply-cutting deal which involves cutting 1.8 million barrels a day through March 2018, and subsequently extended until December 2018, was instrumental for the improvement of crude oil prices that hit US$80 a barrel. Cash-hungry Saudi Arabia was reportedly looking at US$80, or even US$100 a barrel, to boost Aramco’s IPO – arguably the largest in history.

 

However, by April this year, President Trump expressed his unhappiness over the skyrocketing crude oil price. He tweeted – “Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea, Oil prices are artificially Very High! No good and will not be accepted!”

Even as Saudi Arabia was fighting with OPEC members on Friday, the U.S. president unleashed his tweet – “Hope OPEC will increase output substantially. Need to keep prices down!” Clearly, it was a reminder from the superpower to Saudi about its rival – Iran – of which Trump administration has pulled the U.S. out of the Iran nuclear deal vowing new and “powerful” sanctions on Iran.

 

Iran’s oil minister, Bijan Zanganeh, reportedly stormed out of a preparatory technical meeting in Vienna, frustrated by what he saw as Saudi Arabia forcing through its proposals. Zanganeh complained it was Trump who had created difficulty for the oil market by imposing sanctions against Iran and Venezuela and then simply expecting OPEC to pump more.

 

Accusing Trump of weaponising crude oil, the Iranian oil minister said – “President Trump thinks that [he] can order OPEC and instruct to OPEC to do something … It’s not fair, I think, and OPEC is not a part of the Department of Energy of the United States.” RBC analyst Helima Croft agreed that Saudi has made a U-turn on its approach to oil production in the wake of repeated Twitter attacks from Trump.

Of course, Saudi’s excuse for a production increase was to prepare for possible impact of American sanctions on Iran’s oil sector, and the continuing collapse of Venezuela’s oil industry. Saudi Energy Minister Khalid al-Falih on Friday warned the world could face a supply deficit of 1.8 million bpd in the second half of 2018 hence it was OPEC’s responsibility to alleviate consumers’ concerns.

 

Facing mid-term election in November, Trump doesn’t want high crude oil prices to become a factor which could affect his administration. The U.S. government can always threaten to use the country’s Strategic Petroleum Reserve, currently stands at 665.5 million barrels, as a weapon against the OPEC and its allies.

 

Last month, Trump said he is considering selling half the U.S. Strategic Petroleum Reserve to help tackle the country’s ballooning deficit. The strategic reserve, which can store 700-million barrels of crude, was created after the oil shocks of the 1970s, when OPEC slapped an embargo on exports to the West, spooking consumers and spiking prices.

However, as of 2016, after 40 years, the United States has become the world’s latest oil exporter. Essentially, the U.S. can use its reserve to influence the crude oil prices. In 2000, former President Bill Clinton sold off 30 million barrels of the SPR to lower energy prices and ease fuel shortages. Saudi and its minions in OPEC obviously have little choice but to obediently meet Trump’s order.

 

Other Articles That May Interest You …

• BOOM!! – Crude Oil Prices Drop Spectacularly From Its $80 High, And Here’s Why It Will Continue To Fall
• Saudi’s Dream For $100 Oil In Jeopardy As Trump Warns OPEC About Fake High Price
• Thanks To Trump, Oil May Spike To $100 – That’s Precisely What Putin Wants
• U.S. Oil Producers Eating Up Asian Market, And There’s Nothing OPEC Can Do
• Karma Is A Bitch! – Desperate Saudi Whines & Begs U.S. Not To Pump So Much Oil
• Meet United States – The World’s Latest Oil Exporter – After 40 Years
• The Glory Days Are Over – OPEC Warlord Saudi Has Started Borrowing
• Saudi’s Past Arrogance & Terrorists Funding – Is This Karma?

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June 24th, 2018 by financetwitter

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