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Saudi Falih sees slowdown in United States oil output boom

23 June 2018

The black gold has likely picked up a bid due to uncertainty over whether the Organization of the Petroleum Exporting Countries (OPEC) would be able to lift production.

Two OPEC sources told Reuters the group agreed that OPEC and its allies led by Russian Federation should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply.

Iran had bridled at complaints on Twitter by US President Donald Trump that the cartel was artificially inflating oil prices, which touched $80 a barrel last month.

Currently, Libya is producing only 450,000 b/d after clashes at oil ports, Venezuela is declining about 40,000 b/d per month, and Iran's exports are set to drop later in the year because of re-imposed sanctions.

The output gain is nominal.

"In the long term, this will have a negative effect on the global economy even if, in the short term, it might be positive for other non-US producers", Rainer Seele, chief executive at Austria's oil company OMV, said in Vienna where OPEC officials and ministers and top oil industry executives attended a seminar this week.

Support for the increase, which had been proposed by Saudi Arabia against objections from Iran, was unanimous, he said.

Friday's meeting could be a tense affair. "It wasn't a good meeting", Zanganeh told reporters after walking out little more than 30 minutes after the gathering got under way.

"We are making good progress", said United Arab Emirates Energy Minister Suhail Al Mazrouei, who also now holds the position of OPEC president.

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Benchmark Brent crude jumped $2.19 a barrel, or nearly 3 percent, to a high of $75.24 before slipping to around $75 by 1305 GMT.

The correction in prices have been a continuing trend since May 23, when prices breached the $80 mark after the announcement of new U.S. sanctions on Iran and ongoing supply disruptions in Libya and Venezuela.

The production increase will partly undo a 1.2 million barrel cut OPEC agreed on in late 2016 that has helped push up the price of oil.

"We want to prevent the shortage and the squeeze that we saw in 2007-2008", Falih said, referring to a time when oil rallied close to $150 per barrel.

A further 10 countries agreed to participate in Opec's supply cuts, with Russia, Kazakhstan and Mexico as the leading producers. That would effectively mean a modest boost from producers such as Saudi Arabia that have voluntarily cut more deeply than planned.

Saudi Arabia's Oil Minister Khalid al-Falih talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, on June 22, 2018.

Ecuador said Opec and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd.

The outcome of that meeting could give oil users around the world a strong indication as to whether they face the prospect of rising prices later this year - possibly as high as $100 a barrel - or more plentiful supply that would ease the cost of gasoline and diesel.

Saudi Falih sees slowdown in United States oil output boom