OPEC, Russia prepared to raise oil output amid USA pressure

  • OPEC, Russia prepared to raise oil output amid USA pressure

OPEC, Russia prepared to raise oil output amid USA pressure

The more generous option favored by Russian Federation would deliver an additional 700,000 to 800,000 barrels a day, the person said.

"Speaking at the St. Petersburg International Economic Forum in Russia, Al Falih said: "I think in the near future there will be time to release supply" smoothly to avoid shocking the market".

USA oil futures fell 4.5 per cent to US$67.50 a barrel in NY on Friday.

The energy ministers of Saudi Arabia, Russia and the United Arab Emirates are discussing an output increase of about 1-million barrels per day, sources told Reuters.

Oil prices got close to $80 per barrel in May, a level it has not seen since November 2014, on strong demand, ongoing supply cuts led by producer cartel OPEC and looming USA sanctions against major crude exporter Iran.

Saudi Energy Minister Khalid al-Falih on Friday wrote on Twitter that he had spoken with the director of the National Energy Administration of China and they agreed that "the current oil market anxiety is a reflection of the geopolitical situation and not a result of any supply shortage". The worldwide benchmark for oil prices last week hit a 3½-year high of $80.50, also going back to November 2014, added CNBC.

He then announced this shift in policy that all but gave a green light for a market sell-off.

A flag with the Organization of the Petroleum Exporting Countries (OPEC) logo is seen during a meeting of OPEC and non-OPEC producing countries in Vienna, Austria September 22, 2017.

He said he will meet with OPEC ministers in June to discussion a production increase, which he said was likely and - just like earlier production cuts - should be "proportionate, for the sake of fairness" so that all producers can benefit from the increase. "Only a few members have the capability to increase production, so implementation will be complicated", one Opec source said.

In a letter to investors earlier this month, Pierre Andurand, the bullish oil hedge fund manager, warned that if Saudi Arabia needs to "offset production declines from Iran and Venezuela" global spare capacity would decline to perilous levels.

"The size of the supply increase is still a question mark, but otherwise there can be no doubt anymore that Saudi Arabia and Russian Federation will be increasing supplies in the second half", said Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland.

While Russia and OPEC benefit from higher oil prices, up nearly 20 percent since the end of previous year, their voluntary output cuts have opened the door to other producers, such as the US shale sector, to ramp up production and gain market share. "However, there is only a marginal downward revision, as the growth is expected to be supported by twin engines of consumption and gradual recovery in capex cycle in FY19", a report by Yes Bank said. The U.S. government estimates the cushion at just 1.34 million barrels a day next year, below the 1.4 million reached in 2008 when oil prices surged to almost $150 a barrel.