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OPEC and Russian Federation to Raise Crude Oil Output

27 May 2018

While al-Falih and Russia's Novak have indicated that output will most likely increase, the details - how many barrels from which countries - are still a question mark.

"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".

Reuters reported overnight that the groups are discussing gradually raising output by around a million barrels per day.

The existing deal came into force on January 1, 2017, and envisaged global oil producers reducing their combined output by 1.8 million barrels per day (bpd) to cut bloated stockpiles and prop up oil prices.

Oil is trading near a three-and-a-half-year high as concern about the potential supply disruptions has boosted prices further after crude rebounded from the worst crash in a generation on the back of output cuts made by OPEC and its allies.

"They don't want prices to collapse from here", said Michael Tran, commodity strategist at RBC Capital Markets.

The US has failed to make any impact on the country's oil export process, the Iranian official said, adding that Iran's oil exports will remain unchanged if the Iran nuclear deal, known as the Joint Comprehensive Plan of Action, is salvaged by the European Union following the US withdrawal from the multinational accord.

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But OPEC and Russian Federation could raise oil output by as much as one million bpd as soon as June after the White House raised concerns that oil prices were too high, Reuters reported.

FILE PHOTO: People walk past the logo of the Organization of the Petroleum Exporting Countries (OPEC) in front of its headquarters in Vienna, Austria September 21, 2017. But he said an agreement of a gradual easing was the likely outcome.

"Yet, our central scenario only accounts for an additional drop of 500,000 b/d in Venezuela output and no net Iran supply losses arising from sanctions, just a redistribution of sales away from Europe and Japan/Korea".

Crude oil West Texas Intermediate (WTI) melted down 4.24% on Friday (trading at around 67.88) as Saudi Arabia and Russian Federation are considering ramping up production in order to compensate for the sharp decrease output from Venezuela and potentially also Iran which is at risk of sanctions from the United States.

"Looking forward, we maintain our central scenario but also see a risk of two more oil price paths", Blanch said.

But Dan Pickering, head of the asset-management arm of Tudor, Pickering, Holt & Co., said OPEC's move could remove uncertainty about when OPEC will bring more production online, potentially clearing the way for another rally.

Saudi Arabia has recently shown willingness to push prices higher to bankroll domestic economic reforms and underpin the valuation of its state oil company in a planned initial public offering.

OPEC and Russian Federation to Raise Crude Oil Output