Algiers – OPEC and other oil producers are discussing the possibility of raising output by 500,000 barrels per day (bpd) to counter falling supply from Iran because of US sanctions, a source familiar with the discussions told Reuters.
The development comes as oil reached $80 a barrel this month, prompting US President Donald Trump to call again on the Organization of the Petroleum Exporting Countries (OPEC) to help to bring down prices.
OPEC, Russia and other allies agreed a deal in late 2016 to cut supply, but after months of cutting by more than the pact had called for, they agreed in June to boost output by returning to 100 percent compliance. That equates to an increase of about 1 million bpd.
The current discussions are not finalised, but it would mean that oil producers would need to lower compliance to less than 100 percent, the source said on Friday.
Benchmark Brent oil prices LCOc1 fell by more than $1 on the news of a potential output boost, slipping to below $79 a barrel.
Three OPEC and non-OPEC sources told Reuters on Friday that latest data has shown that OPEC and its allies supplied less oil in August to world markets than they did in July, mainly because of a drop in Iranian production.
In July OPEC and non-OPEC producers reduced output by 9 percent more than called for in their pact. The cut in August was even higher, the three sources said without providing exact figures, which will be discussed in Algiers this weekend.
OPEC sources said that any official action to raise output would require OPEC to hold what it calls an extraordinary meeting – a proposal that is not on the table yet.
But the joint OPEC and non-OPEC ministerial committee known as the JMMC, which meets on Sunday, can still recommend a further increase in output if needed, the sources said.
“There are discussions to increase production by another 500,000 bpd. They (OPEC and non-OPEC) can increase output when they meet in December,” the source said, referring to the next formal OPEC meeting, scheduled for Dec. 3.
On Thursday President Trump linked American support for Middle Eastern countries to oil prices as he again urged OPEC to lower prices.
“We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!” Trump wrote on Twitter.
OPEC’s July decision to raise oil production also followed a series of Trump tweets.
Rising U.S. gasoline prices could create a political headache for Trump before November congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped to boost the US economy.
Iran, OPEC’s third-largest producer behind Saudi Arabia and Iraq, has pledged to block any supply increases. Tehran says the price rally was instigated by Trump himself when he decided to put additional sanctions on Iranian oil sales.
It has also accused arch-rival Saudi Arabia of discrediting OPEC by following instructions from the United States, which is not part of the group. Iran’s oil minister, Bijan Zanganeh, does not plan to attend the meeting in Algiers.
All OPEC production policy decisions must, in theory, gain 100 percent approval from its members. Reuters