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OPEC Reaches Deal to Hike Oil Output

Source: www.gulfoilandgas.com 6/24/2018, Location: Europe

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OPEC ministers announced a deal on 22 June 2018 that will increase oil supplies from the producer group, which has been capping output in order to balance the market and boost prices for the last 18 months.

The agreement came after a week of tense negotiation at OPEC's headquarters in Vienna, Austria. Top OPEC producer Saudi Arabia faced the challenge of convincing a handful of reluctant producers including Iran, Iraq and Venezuela to support an output hike.

While OPEC avoided the disastrous outcome of ending the week without a deal, it left the oil market somewhat disappointed by declining to announce a hard figure.

"With the looming threat of an Iran walkout, the best you could get was deliberate ambiguity," said Helima Croft, global head of commodity strategy at RBC Capital Markets. The following are the meeting’s decisions taken in the Friday meeting: 1. The OPEC+ agreement will continue to be valid for a total reduction of one million and 800,000 barrels/day (1.2 million barrels by OPEC and 600,000 barrels per day by non-OPEC producers). 2. OPEC and non-OPEC producers in recent months have reduced their output beyond the agreed levels to 150% compliance with the deal. 3. According to the decisions adopted during the 174th meeting of OPEC, those members who are in agreement (other than Nigeria, Libya and Iran) and have cut their output beyond the agreed levels, will produce oil proportionate to their quota, in such a manner that the level of compliance to the OPEC+ deal reaches 100 percent. 4. Once these decisions are put into practice, the increased crude oil volumes supplied to the market would not mean an increase in the group’s output and would only be reduction of over-compliance with the output cut plan towards 100% adherence to it.

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