Published: Fri, June 22, 2018
Economy | By Melissa Porter

U.S. Oil Prices Slip a Bit Before OPEC Meeting

U.S. Oil Prices Slip a Bit Before OPEC Meeting

Iran has edged away from a threat to veto any agreement that would raise output, while Saudi Arabia has put forward a plan that would add 600,000 barrels a day - about 0.5 percent of global supply - smaller than the 1.5 million increase Russian Federation proposed.

More important to Saudi Arabia than extra petrodollars is containing Iran, its arch-nemesis.

US benchmark oil prices were slightly lower Thursday while oil prices in Europe and Asia were down sharply, as investors expect a likely decision Friday by global producers to pump more oil will impact overseas markets more than USA markets.

It isn't oil producers calling the shots during today's favorable market for energy producers; rather a tacit agreement between the biggest producer and the biggest consumer of oil appears to be holding sway.

The controls were introduced in 2017 to prop up prices.

"This is not going to be a decision just based on market analysis and supply and demand", said Daniel Yergin, the vice chairman of research firm IHS Markit and author of several books on the energy industry.

The brewing tensions between the world's two largest economies comes ahead of Friday's highly anticipated meeting of oil ministers from around the globe at the Organization of the Petroleum Exporting Countries in Vienna. Iran does at least "understand the necessity to reduce cuts" and has agreed to discuss the matter, Oman's Oil Minister Mohammed Al Rumhy said earlier in the day.

With two days until ministers from the OPEC formally meet in Vienna to decide on policy, delegates attempted to find a plan to boost production and ease consumer anxiety about high oil prices that wouldn't provoke a veto. That may seem insignificant in a global supply of 98 million barrels a day, but critically it would reverse reductions that the same countries approved in late 2016, helping push crude higher by more than 50 percent.

WTI crude oil prices ticked higher by 1.4 percent to $65.84/bbl on Wednesday following a drop in US commercial crude inventories this week, but all eyes will be on Vienna by the end of the week.

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

Trump's involvement in pressing for OPEC to act - which in addition to his tweets include a behind-the-scenes request for a 1 million-barrel-a-day supply hike - could make it hard for Tehran to accept a compromise.

"Consumers are asking for more supply in the second half", said Saudi Arabia's Al-Falih. All comments are subject to editorial review.

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