Date: 08 June 2018, 18:56, READ:
The Organization for Petroleum Exporting Countries (OPEC) may increase oil output in June. According to Azertac, OPEC is taking this step with regard to the concerns about Iran and Venezuela's oil supplies. The decision is expected to be made at the 174th meeting of the OPEC Ministerial Council to be held in Vienna, Austria on June 22. According to sources close to OPEC, the organization is considering all options and may decide to increase the production in June. However, there is still no exact figure on how to increase the quota for oil production reduction. Additionally, OPEC member and non-OPEC countries may choose to mitigate the record level of the oil production reduction deal. According to the International Energy Agency (IEA), OPEC 172% complied with the Vienna Agreement in April.
Commenting on the issue, economist Vugar Bayramov told that there were dozens of positive sides of the proposal: "US wants OPEC to increase daily oil output by a million barrels. The OPEC + members, which will come together in 2 weeks, have to reconsider the production against the background of the high oil prices. It seems the US does not want an output increase, and some other countries, including Russia, are also interested in this issue. The Russian President’s statement that $ 60 per barrel is acceptable for his country is an example for it. Obviously, messages from Washington are carefully considered. This means if the US continues insisting on oil production increase, then OPEC will start producing more "black gold" on the world market. On the other hand, if China's oil demand does not change, then oil prices will continue to rise." stressed Bayramov.
Bayramov said the OPEC had two options at the moment: "The organization could either increase oil production 2 weeks later by more than 1 million barrels per day in accordance with the US demand, or may preserve the current production higher than the demand in the world market. In the first case, the decline in oil prices is inevitable. In this case, the Brent crude oil can be up to $ 65 per barrel. In the second case, the price of oil will rise again and the barrel of Brent crude oil will reach $ 85 per barrel. OPEC's choice will depend on new messages given from the White House."
Ilham Shaban, head of Oil Research Center, energy expert told "Kaspi” that today the US imposes sanctions against Iran: "Certain restrictions have been imposed on Iran in world market during the previous sanctions. The US wants the same developments to occur. The sanctions will be applied in the second half of the year and therefore the US wants OPEC to meet the demand of oil volume that will not be exported by Iran in order to prevent oil shortages in the world market. The United States has previously believed that Saudi Arabia would solve this problem by its own. However, there was no unanimous decision on the issue by the OPEC countries over jealousy by other countries." added Ilham Shaban.
"As for the solution of the problem at the OPEC conference, I deem this is still a question as Iran is continuing to persist in exporting oil to the world market. The whole issue here is up to the buyers. If oil is not purchased, producers won’t be able to produce more. If they try to sell oil, they will have to deal with smuggling. In this case, the oil will be sold at 2-3 times cheaper than the market prices. At present, the processes continue to be complicated. OPEC intends to approve the proposal of the U.S. Thus the US proposal is in their interest. The more OPEC countries will get on the market, the more revenue they will get. On the other hand, the OPEC countries' fair price was $55-60 per Vienna agreement. Countries got more income after the oil price rose to $ 70. Even if the output is $ 1 million, prices may drop by $ 5-10, which is still a good price for them. Because oil prices in most oil countries have been predicted about $ 45. Even if the prices fall to $ 60, these countries get profits. Thus, the profit is 20 percent higher than the budget forecast." Ilham Shaban noted.