Suhail Mohamed Al Mazrouei, UAE Minister of Energy and Industry and President of the OPEC Conference (L), with HE Mohammad Sanusi Barkindo, OPEC Secretary General

JAKARTA (TheInsiderStories)–The 4th of the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC Ministerial in Vienna, Austria clear out with conclusion raised the output targets. Benchmark Brent oil rose by 3.4 percent on that day to US$75.55 a barrel followed the result.

The meeting was held on Saturday (23/06) under the Co-Chairmanship of OPEC’s President, Suhail Mohamed Al Mazrouei, Minister of Energy & Industry of the United Arab Emirates and Head of its Delegation, and Alexander Novak, Minister of Energy of the Russian Federation.

As a conclusion, the members agreed to recalling the 171st OPEC Conference Resolution reached on Nov. 30, 2016 for a production adjustment of 1.2 million barrels a day (MBOD) for OPEC Member Countries, with the understanding reached with key non-OPEC participating countries, including The Russian Federation, to contribute a production adjustment of 0.6 MBOD.

Yesterday, crude oil prices fell after Saudi Arabia and Russia signaled that output increases by OPEC and allied countries will be bigger than expected. According to Saudi Aramco’s CEO Amin Nasser the world’s largest exporter pumps 10 million barrels per day and has the capacity to produce 2 million barrels more.

Brent crude for August delivery shed 1.1 percent, or 82 cents, to settle at $74.73 a barrel on the ICE Futures Europe exchange. Meanwhile, West Texas Intermediate crude for August delivery fell 50 cents to end the session at $68.08 on the New York Mercantile Exchange. Total traded volumes reached about 31 percent above the last 100 day trading average.

The world’s two largest crude exporters indicate that the OPEC deal last week will increase production by 1 million barrels daily, more than the 700,000 barrel figure agreed by some OPEC members. Meanwhile, U.S crude oil futures for immediate delivery fell lower than other contracts amid concerns over tightening supplies at key U.S storage.

Beside They also reaffirming the continued commitment of the participating producing countries in the ‘Declaration of Cooperation’ (DOC) to a stable market, the mutual interest of producing nations, the efficient, economic, and secure supply to consumers, and a fair return on invested capital, and noting the overall improvement in market conditions and sentiment, and the return of confidence and investment to the oil industry.

The DOC reached on Dec. 10, 2016 also recalled cause no one of the countries participating have exceeded the required level of conformity that had reached 147 percent in May 2018.

Accordingly, the 4th OPEC and non-OPEC Ministerial Meeting decided that countries will strive to adhere to the overall conformity level, voluntarily adjusted to 100 percent, as of July 1, 2018 for the remaining duration of the DOC and for the Joint OPEC and Non-OPEC Ministerial Monitoring Committee (JMMC) to monitor the overall conformity level and report back to the OPEC and non-OPEC Ministerial Meeting.

The members decided that the next OPEC and non-OPEC Ministerial Meeting will convene in Vienna, Austria, on Dec. 4, 2018.

Oil Price

As we predicted the meeting closed without an agreement amidst the divide opinion by the members. The countries stance is split over plans to increase production or lower the production.

Previously, Saudi Arabia as head of OPEC supported by Russia intends to increase production, while Iran together with Iraq and Venezuela wants the group to maintain a deal on production cuts.

Based on the organization data, the OPEC Reference Basket price fell by an extraordinary 80 percent between June 2014 and January 2016. The price of OPEC basket of fourteen crude stood at $71.89 a barrel (bbl) on Friday (22/06), compared with $70.96 the previous day, according to OPEC Secretariat calculations.

In its latest Short-Term Energy Outlook, the United States’s Energy Information Administration (EIA) forecasts that Brent crude oil spot prices will average $71/bbl in 2018 and $66/bbl in 2019. EIA also expects West Texas Intermediate (WTI) crude prices to average $5/bbl lower than Brent prices in both 2018 and 2019.

It said, the movement of oil prices reflect the continuous drawdown of global petroleum inventories. Since January 2017, the beginning of the crude oil production cut agreement among certain countries within and outside the OPEC, global petroleum inventories have declined at an average rate of more than 500,000 BOD.

Excluding Libya, Nigeria, and Equatorial Guinea—countries not subject to the production reductions—OPEC countries produced an estimated 29.3 MBOD in April, the lowest levels since April 2015 and 400,000 BOD below the agreed-upon production reductions.

Oil prices may have also risen in anticipation of the potential reinstitution of U.S sanctions on Iran, which could contribute to declines in the country’s crude oil production

Last week, EIA reported U.S oil stocks slumped 4.14 million bbl. This is the biggest decline since March 30 last. Previously, Oil prices lost power because Saudi Arabia and Russia signaled to boost oil production.

This is done to offset the potential decline of production from Iran and Venezuela. EIA estimates that the production of both countries could fall by 30 percent this year due to US sanctions and the economic crisis.

OPEC and some non-OPEC producers, including Russia, began to hold production in 2017 to reduce oversupply. Since then prices have risen by about 60 percent over the past year.

Today as traders factored in an expected 1 MOBD output increase in the wake of an OPEC meeting. Despite this, analysts said global oil markets would likely remain relatively tight this year.

The prospects for the oil market in the second half of the year are uncertain, analysts said, and OPEC believes there is a risk of falling demand.

Email: linda.silaen@theinsiderstories.com