Published: Fri, June 22, 2018
Money | By Armando Alvarado

Oil prices rise as OPEC meets

Oil prices rise as OPEC meets

"In the long term, this will have a negative effect on the global economy even if, in the short term, it might be positive for other non-US producers", Rainer Seele, chief executive at Austria's oil company OMV, said in Vienna where OPEC officials and ministers and top oil industry executives attended a seminar this week.

Index provider MSCI said late Wednesday it would reclassify Argentina and Saudi Arabia as emerging market countries next year, broadening the investor base for both countries. The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016.

Adding an extra one million barrels per day to the market "sounds like a good target to work with", Saudi Energy Minister Khalid al-Falih said at a seminar organised by the Organization of Petroleum Exporting Countries (OPEC).

The convoluted plan shows the difficulty Saudi Arabia has in bridging the gap between the competing interests of different members.

That would effectively mean a modest boost from producers such as Saudi Arabia that has been cutting more deeply than planned despite production outages in Venezuela and Libya.

The heightened trade tension between the United States and China over the past week resulted in China threatening to slap a 25-percent import tariff on crude oil and refined oil product imports from the United States.

Falih also said the real increase would be smaller than the nominal gain of 1 million bpd, meaning a compromise with Iran remained possible.

A decision to increase output could be taken even with Iran refusing to sign up, as has happened before in OPEC.

In case of reduced United States oil exports to China, the biggest victor of an oil trade war will be OPEC-the supplier that has seen its market share diminished by USA oil.

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The dispute was settled by the time of the next Opec talks.

President Trump, who fears higher gas prices, has been putting pressure on OPEC to raise production.

Falih has warned the world could face a supply deficit of up to 1.8 million bpd in the second half of 2018 and that Opec's responsibility was to address consumers' worries.

Riyadh has said it is ready "to mitigate the effects of any supply shortages" from USA sanctions on Iran's oil.

Zangeneh also said on Friday OPEC would change the structure of the current deal, but did not elaborate.

Mr. Pradhan went on to say that the prices of oil and gas had become subject to the "vagaries of geopolitics" and urged the OPEC countries to commit towards ensuring more sustainable prices.

While trade wars may hurt global economy, therefore hurting global oil demand in the long run, in the short term, the victor will be OPEC.

Gulf producers usually aligned with Saudi Arabia - the UAE, Kuwait, Oman and Bahrain - have also cautioned against a large output increase and signalled they have been rattled by Riyadh's close coordination with Russian Federation, sources have said.

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