OPEC, Having Bolstered Oil Prices, Considers Ramping Up Production

OPEC, Having Bolstered Oil Prices, Considers Ramping Up Production

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While he vowed to be “sensitive” to the concerns of producer countries like Iran and Venezuela that are unlikely to be able to raise output and benefit from increased production, he made clear that Saudi Arabia was determined to increase supplies. Mr. Falih said he hoped to keep the group together, and to work in unison to head off extremes like prices that topped $100 a barrel in 2014, only to be followed by a sudden crash.

“One thing you can be assured of is, we will be responsive,” he added. “We will release supplies.”

Though the prospect in recent weeks of increased supplies has helped cool off what had been fast-rising prices — Russia and Saudi Arabia had proposed the outlines of Thursday’s deal last month — what happens to prices now will most likely depend on myriad factors that are out of OPEC’s control. Among the main variables are the possible impact of recent American sanctions on Iran’s oil sector, and the continuing collapse of Venezuela’s oil industry, as well as the consequences of a widening array of trade disputes on economic growth and demand for oil.

Illustrating the ever-more-complex environment affecting oil prices is the role the United States plays in world energy markets. While Mr. Trump, perhaps with an eye on the midterm elections in November, is leaning on OPEC to keep gasoline prices down, the United States is on the verge of becoming the world’s largest oil producer, as well as a major exporter of both oil and gas.

“I think this rearranges the mental geography of the global oil market and, really, geopolitics,” said Daniel Yergin, an oil historian observing the OPEC meeting in Vienna.

The transformation of the American oil industry over the last few years, largely as a result of shale drilling, has turned the United States from a major energy importer into a petroleum powerhouse. That has led Saudi Arabia and Russia, the world’s two other leading oil producers, but which have not always seen eye to eye, to create a bloc large enough to influence prices.

But the pre-meeting fireworks with Iran showed how hard it would be to preserve unity among other producers, now that prices have risen. Tehran, in particular, has been infuriated by the Saudi call for increased production. The country has also been particularly affected by the rise in United States oil exports — the resurgent American sector has made it easier for Mr. Trump to risk reimposing sanctions on Iran, which throttle back what had been rising oil exports from the Gulf country.

(Original source)

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