Saudi Arabia has struck a deal that will see Opec and its allies increase oil production by up to one million barrels a day in an effort to cool a rally in crude prices that has lifted them to their highest level since 2014.
Khalid al Falih, the kingdom’s energy minister, who has faced pressure from the US and other big oil importers to cap prices before they harm the broader economy, said Opec members would move to raise output.
The deal, if rubber-stamped as expected on Saturday by non-Opec producers including Russia, could see Saudi Arabia and other nations with spare production capacity boost output at the expense of their peers.
"It will be one million [barrels a day/] collectively," Mr Falih said, adding that some countries were better placed to raise output than others.
The agreement was reached despite opposition this week from Iran, whose oil minister Bijan Zanganeh argued that raising oil output was tantamount to doing the bidding of US resident Donald Trump, who has accused the cartel of "artificially" raising prices.
Iran is the third-largest producer in Opec but its exports are expected to fall this year due to the reimposition of US sanctions on its energy industry following the Trump administration’s withdrawal from the nuclear deal.
The one million barrels a day figure was not included in the final statement from the meeting, suggesting a possible concession to Iran, whose oil minister presented the increase as a minimal adjustment returning the group to their original supply targets.
After the meeting Mr Trump said on Twitter: “Hope Opec will increase output substantially. Need to keep prices down!”
The production increase may not mean immediately lower prices, however. Some traders and analysts have raised concerns about the limited amount of spare capacity in the market.
While oil prices have pulled back from the four-year high above $80 a barrel hit last month, they rose after the deal on Friday. Brent crude oil was trading 2 per cent higher at $74.58 a barrel.
The group is expected to review the impact of the increase, which starts in July, in September. – Copyright The Financial Times Limited 2018
