OPEC ministers announced a deal that will increase oil supplies from the producer group, which has been capping output in order to balance the market and boost prices for the last 18 months. However, no firm figures relating to production increase were announced nor was it indicated how the increases would be allocated among members.
The agreement came after a week of tense negotiation at OPEC’s headquarters in Vienna. Top OPEC producer Saudi Arabia faced the challenge of convincing a handful of reluctant producers including Iran, Iraq and Venezuela to support an output hike. OPEC’s official statement said members agreed to return to 100 percent compliance with the 2016 deal beginning on July 1. The group said compliance reached 152 percent in May 2018, which means OPEC was cutting about 600,000 bpd more than it intended.
Commentators believe that this OPEC decision is a victory for Saudi Arabia and that one million barrels per day could now be added to the market by OPEC producers. These additional supplies will not be produced immediately as most countries are not in a position to boost production so quickly, so that additional supplies would be about 600,000 b/d.
However, the promise of increased Saudi production to make up for the withdrawal of Iranian oil from the market led to a slight fall in prices.