OPEC reaches deal to raise oil output

OPEC strikes deal to boost oil production | TheHill

OPEC strikes deal to boost oil production | TheHill

Maybe the fear of returning sanctions and the possible shortage of crude in the absence of Iran's production caused the rise in the price.

But Nigerian Oil Minister Emmanuel Ibe Kachikwu said the deal is actually to boost output by 700,000 barrels a day in the second half of this year.

How that translates into effective production increases is uncertain, as some OPEC countries can not easily ramp up production.

This perhaps applies even more to the future price trajectory for the globally traded "Black-gold" going into 2019.

It's a dramatic policy change for the organisation known as OPEC.

USA crude settled up 4.6 percent at $68.58 a barrel and Brent settled 3.4 percent higher at $75.55 after oil producers agreed to modest crude output increases to compensate for losses in production at a time of rising global demand.

Except for shale plays in the USA, there is still a general hesitation in committing resources for oil exploration and development across the globe.

But it remains to be seen what kind of compromise could emerge, given Iran's deep aversion to any attempt by OPEC allies to offset its expected production losses as a result of the impending U.S. sanctions.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

Additionally, the current Venezuelan sanctions against the incumbent communist government of President Maduro prohibits buying or accepting as collateral any debt owed to the government or state owned PdVSA. "This means that Saudi Arabia can increase its production by less than 100,000 bpd", Zanganeh told Argus Media.

"I agreed to have 100 percent of compliance, not more", Iran's Zanganeh said as he left OPEC headquarters on Friday. Between them, they can easily produce the extra oil required. These have been the key drivers behind supply/demand dynamics since the global economic recovery commenced a decade ago.

After a meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel chose to fully comply with its existing production ceiling.

The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting. Nevertheless, we know only too well that as long as the ayatollahs are running an ideological political system in Tehran, there will be no similar progress in matters of regional compliance.

The euro rose after IHS Markit data showed business activity in Germany and France, the euro zone's top two economies, picked up in June despite U.S. -Europe trade tensions.

Up to April 2018, while oil prices increased by almost 25% compared to the same period previous year, investment in oil industry has not picked up in a commensurate manner. This should reduce recent supply restrictions in the face of growing global consumption levels. On the upside, Crude oil prices also have the expected 1.44 mbpd increase in demand (up to 98.16 mbpd in 2018) for a Bullish case.

Benchmark U.S. 10-year yields were up on Friday, but have declined on a weekly basis for two straight weeks.

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