Major oil-producing nations agree to raise production from July
Oil prices had gone up after the Organisation of Petroleum Exporting Countries agreed to cut output in late 2016.
Members of the Organization of Petroleum Exporting Countries decided on Friday that they would increase the output of crude oil by around 1 million barrels a day from July, AFP reported. The move, meant to meet “extra demand”, is expected to push global oil prices down again, as demanded by major consumers such as India and the United States.
Energy ministers of member nations met in Vienna to discuss whether they should continue with the cut in supply they had decided on in late 2016 in a bid to increase prices. Oil prices had reached around $30 a barrel in early 2016 due to a global glut, but have recovered to around $70 now.
“I think it will contribute significantly to meet the extra demand that we see coming in the second half [of the year],” Saudi Arabia Energy Minister Khalid al-Falih told reporters after the meeting.
Saudi Arabia argued strongly in favour of increasing production, and was supported by non-member Russia. Rival Iran opposed the idea, and so did Venezuela. Iran expects trouble for its economy after the United States pulled out of the nuclear deal, and wants prices to remain high. Venezuela is in the midst of an economic crisis. However, the members were able to reach a compromise.
The deal struck on Friday may not have an impact on the actual supply. The member countries had agreed on a production cut of 1.8 million barrels a day in late 2016, but many of them had exceeded their restriction quotas for various reasons. The organisation has said this kept around 2.8 million barrels a day output away from the market.
Therefore, a production boost of 1 million barrels a day now means member countries are simply committing to adhere fully to the deal struck in 2016, according to AFP.
Non-members need to approve the agreement in a meeting in Vienna on Saturday.
United States President Donald Trump tweeted: “Hope OPEC will increase output substantially. Need to keep prices down!” The US, like India, is a major consumer.