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OPEC won't react to small, short-lived oil supply disruptions: senior OPEC source

Reuters  |  DUBAI 

By El Gamal

(Reuters) - is monitoring in as well as Venezuela's economic crisis, but the group will only boost output if there are significant and sustained production disruptions from those countries, a senior source from a major Middle Eastern said.

Venezuela's economic troubles have hit the country's output, which is at near 30-year lows, but Iran's output has not been affected by a wave of anti-government protests.

Traders said political tensions in Iran, the third-largest in the Organization of the Exporting Countries (OPEC), had pushed prices higher.

Brent crude, the international benchmark, was trading at around $67.52 a barrel, on Monday. Brent hit $68.27 high last week, the highest since May 2015, on tensions.

Saudi Arabia, OPEC's de-facto leader, wants to see prices above $60 a barrel, to boost the valuation of its national company ahead of an initial public offering (IPO) later this year and to reduce the gap in its state budget, Saudi sources have said.

"Even if there was a supply disruption (from or Venezuela)... will not raise output," the senior source said.

"OPEC's policy is to bring inventories down to their normal levels and will stay the course, unless the disruption in supply of something like 1,000,000 barrels per day persists for more than a month, and causes shortages of crude supply to consumers."

Venezuela's dilapidated sector is struggling as U.S. sanctions and a lack of capital hobble operations, and its economic crisis threatens to do further harm to the country.

The senior source also said the market was on its way to being re-balanced, but so far global inventories remained above their five-year average and much more time was needed to drain the glut.

"Any change in production limits must be driven by a change in market fundamentals and not just speculations for a short period of time, for to change the output ceiling," he said.

The protests in that began in late December have posed no immediate threat to production but there is concern that U.S. may reimpose sanctions on Iranian oil, which could disrupt exports.

Trump must decide by mid-January whether to continue waiving U.S. sanctions on Iran's exports under the terms of an international nuclear deal.

The senior source said that while more U.S. sanctions on Iranian were possible, they would take time to affect supplies and so their impact was difficult to gauge.

OPEC, supported by and other non-members, began to reduce output a year ago to remove an glut built up in the previous two years. Compliance has been high, as producers have decided to extend the supply pact until the end of 2018.

OPEC's cuts are helping to reduce global inventories, even as production continues to rise in the U.S. production rose to 9.78 million barrels in the last week.

(Reporting by El Gamal. Editing by and Jane Merriman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 08 2018. 16:50 IST