Oil prices dip as Iran signals support for small OPEC supply increase

Oil prices dip as Iran signals support for small OPEC supply increase

Oil prices fell on Thursday as crude exporters in Opec appeared to be nearing a deal to increase production.

Along with non-member Russia, Saudi Arabia is pushing hard to ease a production cap that has more than doubled oil prices to around $70 per barrel since 2016.

But Opec's crunch meeting in Vienna on Friday finds the oil cartel divided after almost two years of unity over production curbs, which were due to run until the year's end.

Other OPEC-members, including Iran, are against such a move, fearing a sharp slump in prices.

United States crude oil production was flat week-on-week, remaining at a record 10.9 million bpd.

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Iran, with some support from Venezuela, has so far rejected any increase, including one compromise mooted in private by some OPEC officials for a 300,000-to-600,000 barrel-a-day hike in the second half of the year. The market is now under "OPEC-Watch" with numerous major players on the sidelines until the cartel along with Russian Federation makes its decision about production rates at its meeting in Vienna on June 22-23.

Iran has said that OPEC should stick to the terms of the production cut agreement, which took effect at the start of 2017 and is scheduled to run through the end of 2018.

"We will do whatever is needed to maintain market stability and ensure that there are no oil supply shortages", said Abdulaziz bin Salman, a Saudi prince and minister of state for energy affairs.

OPEC and its allies have since past year been participating in a deal to cut output by 1.8 million bpd. He said Trump had contributed to the rise in prices by imposing sanctions on Opec members Iran and Venezuela, which will likely lead to lower exports.

It remains to be seen whether they get Iran and others onboard for a formal Opec agreement, or go ahead with increases regardless. Zanganeh said he would leave Vienna on Friday even before Opec holds talks with non-Opec producers the next day, but efforts were underway on Wednesday to convince Iran to participate in a deal. Zanganeh was due to attend a ministerial committee on Thursday, two sources said. Iraqi Oil Minister Jabar Al Luaibi said on Wednesday he hoped there would be agreement when Opec meets but added: "The oil market has not reached the level of stabilisation". Iran is usually not part of the committee, which groups Russia, Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Algeria and Venezuela.

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