Due to the staunch opposition to any production increase from the faction led by Iran and Venezuela, analysts expect this week's OPEC meeting to be a very hard one, comparing it to the 2011 meeting, which the then Saudi Oil Minister Ali al-Naimi described as "the worst OPEC meeting of all time", Commerzbank commodities analyst Carsten Fritsch told Reuters.
Analysts expect the group to consider an increase in production of about 1 million barrels a day, ending the output cut agreed on in 2016. On the other side, less privileged OPEC members like Iran, Venezuela, Iraq, Angola, Libya and Nigeria whose production levels have been under pressure by different geopolitical and economic factors like USA sanctions and budget deficit need the prices to stay at current levels.
As though the increased anxiety ahead of an OPEC meeting were not enough for the oil markets, a fresh round of ammo fired by Trump has resulted in higher volatility.
"If the Kingdom of Saudi Arabia and Russian Federation want to increase production, this requires unanimity". But U.S. production has not reached the maximum rates in the past year and in the first half of this year.
The agency noted that if the 2018 and 2019 forecast annual averages materialize, they would be the highest levels of production on record, surpassing the previous record set in 1970.EIA expects that OPEC crude oil production will average 32.0 million b/d in 2018, a decrease of about 0.4 million bpd from the 2017 level. Indeed, the single largest factor that could push prices down going forward would be a sizable increase in OPEC plus supply. Some countries including Algeria, Iran and Venezuela said at the panel meeting that they still opposed an output increase, one of the sources said.
Meanwhile, Hindustan Petroleum Corporation Limited (HPCL) Chairman Mukesh K. Surana also said fuel prices may be lowered post the upcoming OPEC meeting. I mean, Iran, Saudi Arabia, Russia etc.
The willingness of the Saudis to do more than ensure the market remains balanced may be disciplined by their own finances - the production limits and consequent higher prices have stemmed the haemorrhaging of their own public finances that occurred when oil prices plunged.
The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna next week to discuss potential reduction or revision to the 1.8 million barrels/day production cut put in place in early 2017.
Escalating trade tensions between the US and China were also weighing on global markets including oil, said John Kilduff, partner at energy hedge fund Again Capital LLC in NY. Brent crude jumped $1.55 to $74.99 a barrel. As U.S. ally, they raised their production levels slightly to appease Trump and keep the prices from further rising.
This suggests that there has been a rebalancing after years of an overwhelming oversupply of the commodity; equally, it could also point to underlying concerns that have been evident for some time, that some members no longer wish to comply with OPEC's production cut deal. "In this connection, OPEC countries will benefit from lowering prices and cooling the surge of the United States activity", Alexei Belogoriev said.