OPEC, Russia to increase oil production to offset Venezuela and Iran cuts

Reuters:

Saudi Arabia and Russia are discussing raising OPEC and non-OPEC oil production by some 1 million barrels a day, sources said, while OPEC’s chief said a complaint from U.S. President Donald Trump over high prices had triggered the idea of upping output.

Riyadh and Moscow are prepared to ease output cuts to calm consumer worries about supply adequacy, their energy ministers said on Friday. Saudi Arabia’s Khalid al-Falih and Russia’s Alexander Novak both said any such move would be gradual.

Raising production would ease 17 months of strict supply curbs amid concerns that a price rally has gone too far, with oil LCOc1 having hit its highest since late 2014 at $80.50 a barrel this month.

OPEC began a discussion about easing production cuts following a critical tweet from Trump, OPEC’s Secretary-General Mohammad Barkindo said. Trump tweeted last month that OPEC had “artificially” boosted oil prices.

“We pride ourselves as friends of the United States,” Barkindo told a panel with the Saudi and Russian energy ministers in St. Petersburg at Russia’s main economic forum.

The Organization of the Petroleum Exporting Countries and allies led by Russia have agreed to curb output by about 1.8 million barrels per day (bpd) through 2018 to reduce global stocks, but the inventory overhang is now near OPEC’s target.
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This is not too surprising.  Both the Saudis and Russians will try to maximize income and the cutbacks in Iran and Venezuela give them an opportunity to do so while maintaining prices at a profitable level.