VIENNA • Opec yesterday agreed on a modest increase in oil production from July after its leader Saudi Arabia persuaded arch-rival Iran to cooperate amid calls from major consumers to help reduce the price of crude and avoid a supply shortage.
Two Opec sources said the group agreed it and its allies led by Russia should raise production by about one million barrels per day (bpd), or 1 per cent of global supply.
The real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap, Opec sources said.
The United States, China and India had urged Opec to release more supply to prevent an oil deficit that would hurt the global economy.
Saudi Arabia and Russia said they were happy to pump more but Iran had criticised the idea as it faces export-crippling US sanctions.
Iran, Opec's third-largest producer, had demanded that the group reject calls from US President Donald Trump for an increase in oil supply, arguing that Mr Trump had contributed to a recent rise in prices by imposing sanctions on Iran and Venezuela.
Mr Trump slapped fresh sanctions on Teheran in May and market watchers expect Iran's output to fall by a third by year-end. That means the country has little to gain from a deal to raise Opec output, unlike top oil exporter Saudi Arabia.
But Saudi Energy Minister Khalid al-Falih seemed to have convinced his Iranian peer Bijan Zanganeh to support the increase just hours before yesterday's Opec meeting.
Opec and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and lifted oil to around US$75 per barrel from as low as US$27 in 2016.
But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.
Brent oil prices were up 1.9 per cent yesterday as the output boost had been largely priced in and was seen as modest.
"It will be enough for now but not enough for the fourth quarter to address a decline in Iranian and Venezuelan exports," said Mr Gary Ross, head of global oil analytics at S&P Global.
"There isn't a lot of spare capacity in the world. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? We are in for higher prices for longer," he added.