Defusing row, OPEC agrees to output rise

OPEC energy ministers today said they would be putting more oil onto the market to meet "extra demand", reaching a last-ditch compromise in a spat that had pitted Saudi Arabia against archfoe Iran.

The ministers said they had agreed to boost oil production by around a million barrels a day from July.

"I think it will contribute significantly to meet the extra demand that we see coming in the second half," Saudi Energy Minister Khalid al-Falih told reporters after a crucial OPEC meeting in Vienna.

The tense talks had centred around whether to amend an 18-month-old supply-cut deal between members of the Organization of the Petroleum Exporting Countries and allied countries that has cleared a global oil glut and lifted crude prices.

Saudi Arabia, backed by non-member Russia, had argued strongly in favour of increasing production as grumbles in major consumer countries like the United States, India and China have grown about the spike in prices.

But regional rival Iran opposed any changes to the original production-cut deal at a time when its oil industry is facing renewed sanctions over US President Donald Trump's decision to quit the international nuclear deal with Tehran.

In the end, both sides were able to save face.

The current production curb pact calls for participating countries to trim output by 1.8 million barrels a day.

But a mix of production constraints and geopolitical factors have seen several nations exceed their restriction quotas, keeping some 2.8 million barrels off the market, according to OPEC.

By agreeing to boost output by a million barrels, member countries are simply committing to adhere fully to the deal struck in late 2016.

"I agreed to have 100 per cent of compliance, not more. We accepted this, not more," Iranian Oil Minister Bijan Namdar Zanganeh said on his way out of the OPEC headquarters.

Iran was not alone in its resistance.

Venezuela, in the throes of an economic crisis, also opposed lifting the cartel's output ceiling, as did several other countries who would struggle to significantly increase production in the near term.

The agreement still needs to be approved by non-OPEC ministers meeting in Vienna on Saturday, including powerful player Russia.

Russia had sided with Saudi Arabia in the spat, and had even signalled it wanted a higher output hike, as Moscow feels the pressure from domestic oil firms eager to cash in on the higher prices. Russian Energy Minister Alexander Novak told reporters yesterday that it was "very important" not to allow the oil market to "overheat".

Global oil prices rose immediately after today's decision, extending earlier gains.

Traders said the new output target increase was modest compared to some expectations, and not enough to allay supply worries.

The landmark supply-cut pact struck between the 24 nations, known as OPEC+, has been credited with lifting crude prices from below USD 30 in early 2016 to around USD 70.

But production shortfalls in some countries had fuelled fears of a supply crunch that could sent prices soaring in the second half of the year, when demand tends to increase.

US President Donald Trump has been among the loudest critics of the price spike, and has been piling pressure on its Saudi ally to boost output in the hopes of bringing down pump prices ahead of November's midterm elections.

Iran's Zanganeh has accused Trump of trying to politicise OPEC and said it was US sanctions on Iran and Venezuela that had helped push up prices.

Tehran was also deeply wary of any changes to the supply-cut pact that would see other countries offsetting Iran's expected oil export losses as a result of the impending US sanctions.

Acknowledging that not all countries will be able to raise production, Iraqi Oil Minister Jabbar al-Luaibi said the output hike agreed would in real terms amount to some 770,000 extra barrels each day.

Much of the current production shortfall has come from Venezuela, where an economic crisis has savaged petroleum production.

In Libya, fighting between rival factions has damaged key oil infrastructure.

At the same OPEC meeting today, ministers formally welcomed the Republic of Congo (Brazzaville) as a 15th member of the oil cartel.