VIENNA (Reuters) – OPEC approached Friday to boost oil production, as its leader Saudi Arabia appeared to have persuaded its archrival Iran to cooperate after major consumers warned of a shortage of supplies.
Saudi Arabia and non-OPEC Russia has said an increase in production of around 1 million barrels per day (bpd) or about 1 percent of the world supply had become an almost consensus proposal for the group and its allies.
The Organization of Petroleum Exporting Countries is meeting in Vienna amid calls from the United States, China and India to cool the price of oil and avoid an oil deficit that would damage the world economy.
OPEC theoretically needs the agreement of all members to close a deal, but in the past it negotiated production pacts without Iran, which has criticized the idea of increasing supply as it faces US sanctions that paralyze exports .
"We are cooking something," Iranian Oil Minister Bijan Zanganeh told reporters after meeting with Saudi Energy Minister Khalid al-Falih before the OPEC talks.
Iran, the third largest producer of OPEC, has so far been the main barrier to an agreement, as it has asked OPEC to reject the pressure of the president of the United States, Donald Trump, to pump more oil.
Trump imposed new sanctions on Tehran in May and market observers expect Iran's output to decline by one third by the end of 2018. That means the country has little to gain from an agreement to increase OPEC production , unlike the main oil exporter Saudi Arabia.
Falih said that the overwhelming majority of producers had recommended increasing production by 1 million bpd, gradually and proportionally.
OPEC and its allies have been participating since last year in a pact to reduce production by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and raised the LCOc1 of oil to around $ 74 per barrel from just $ 27 in 2016.
But unexpected interruptions in Venezuela, Libya and Angola have effectively taken supply cuts around of 2.8 million bpd in recent months.
Brent oil prices rose 1.8 percent LCOc1 on Friday.
OPEC has a history of difficult meetings as well as clashes between Iran and Saudi Arabia.
In 2000, then-USA. President Bill Clinton's energy secretary Bill Richardson telephoned Ali al-Naimi, the Saudi oil minister at the time, during an OPEC meeting to ask for more oil.
The movement angered Iran, and Zanganeh refused to subscribe to the meeting's decision to increase production. The dispute was resolved at the time of the next OPEC talks.
The current confrontation was partially triggered by the United States, with Trump calling OPEC directly to increase production.
Falih has warned that the world could face a supply shortfall of up to 1.8 million bpd in the second half of 2018 and that OPEC's responsibility was to address consumer concerns.
"We want to avoid the scarcity and shortages we saw in 2007-2008," Falih said, referring to a time when oil recovered near $ 150. per barrel.
Earlier this week, Zanganeh left the door open for an agreement, saying that OPEC members who had received too many cuts in recent months should comply with the agreed quotas. That would effectively mean a modest boost from producers like Saudi Arabia who have voluntarily cut deeper than planned.
(GRAPH: OPEC compliance in May – Reuters Survey – reut.rs/2JRWnw1)
Zanganeh has said that if OPEC were to return regularly, the group would increase production by around 460,000 bpd.
On Friday, Zanganeh said OPEC would change the structure of the current agreement, but declined to elaborate.
Falih also said that the real increase would be less than the nominal gain of 1 million bpd, which means that a commitment to Iran is still possible. He said OPEC could meet again in September to adjust the deal.
OPEC sources also said that Iran had demanded that US sanctions be mentioned in the communique following the group meeting, as Tehran blamed US measures for the recent increase in oil prices.
The United States, which rivals Russia and Saudi Arabia for the position of world number one oil producer, is not participating in the current supply agreement.
(GRAPH: Equilibrium between world oil supply and demand – reut.rs/2MB4tH3)
Additional reporting by Ahmad Ghaddar, Ernest Scheyder and Vladimir Soldatkin; Writing and editing by Dale Hudson and Dmitry Zhdannikov; Graphics by Amanda Cooper