OPEC Agrees to Boost Oil Output

Support for increase which had been proposed by Saudi Arabia against objections from Iran was unanimous

Support for increase which had been proposed by Saudi Arabia against objections from Iran was unanimous

"We're taking our breath and focusing on the oil market", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, NC.

Still, some analysts believe that a combination of the OPEC deal, USA oil, and an easing of American demand for energy should eventually contribute to lower oil prices, which in May hit their highest levels in more than three years.

By avoiding setting individual country targets, the deal appears to give Saudi Arabia the leeway to produce more than its official OPEC target and fill the gap left by those like Venezuela who can not pump enough to meet their official allocation. Oil prices LCOc1 rose by $1.85 to $74.90 a barrel.

Friday's decision means the Organization of the Petroleum Exporting Countries will observe the production level it agreed on in late 2016 when it cut output by 1.2 million barrels a day.

After a meeting in Vienna, Emirati Energy Minister Suhail al-Mazrouei said the cartel chose to fully comply with its existing production ceiling. Subsequently, the prospect of a full-blown trade war will likely dent risk on sentiment, which in turn will likely keep a lid on further gains for crude prices.

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OPEC didn't agree to increase production as such.

Some analysts note that while Trump has blamed OPEC, his policies have also helped increase the cost of oil by, for example, limiting exports from Iran.

"The effective increase in output can easily be absorbed by the market", Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas told Reuters Global Oil Forum.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.

Al-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. Compliance has been well above 100% this year since some countries, notably Venezuela, have seen a drop in production.

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"As a group we can meet the 100 percent compliance".

OPEC and its allies have since previous year been participating in a pact to cut output by 1.8 million bpd.

Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher USA policy toward Iran, Saudi Arabia's rival for influence in the region.

"Both Saudi and Iran can show that they won", an OPEC delegate said.

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. The next formal OPEC meeting was set for December 3.

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