Global shares rise, oil prices jump on OPEC news

Lloyd Doyle
June 23, 2018

After a meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel made a decision to fully comply with its existing production ceiling.

OPEC agreed on Friday to raise oil production by around one million barrels per day from July for the group and its allies, an OPEC source said.

Some analysts have said the production hike is not enough because of the USA sanctions against Iran and Venezuela. But since the group had gone well overboard and trimmed output by nearly 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market - on paper, at least.

US officials have also asked Saudi Arabia to help cushion the blow of the return of Iran sanctions by supplying more oil at lower prices. Some analysts note that while Trump has blamed OPEC, his policies have also helped increase the cost of oil by, for example, limiting exports from Iran.

This was a reversal of years of rising production and falling prices, which many saw as an attempt by Saudi Arabia and others to create an oil glut to discourage investment in US shale oil production. Subsequently, the prospect of a full-blown trade war will likely dent risk on sentiment, which in turn will likely keep a lid on further gains for crude prices. "Oil is the bigger story today with the OPEC news".

"There isn't a lot of spare capacity in the world. We're taking our breath and focusing on the oil market", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

"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.

Production levels from participating members put compliance at more than 100 percent, though some of that is attributed to Venezuela. Venezuela's production has dropped amid domestic political instability.

"Zanganeh can go back to his country and say "I won", because we are keeping the original agreement unchanged".

OPEC and non-OPEC producers will meet on Saturday to iron out details of the pact and then again in September to review the deal.

Other reports by Iphone Fresh

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