The OPEC rumor mill continues to churn.
Over the weekend, Iran indicated it would push to prevent a move spearheaded by Riyadh to increase production. The push to lift output comes at the behest of Donald Trump, who is of course concerned that rising prices at the pump are set to eat into the gains expected to accrue to U.S. consumers from the tax cuts.
On Monday, reports indicated the some manner of compromise might be in the works with production rising in the back half of the year by less than everyone was assuming based on initial estimates.
Fast forward to Wednesday and the contentious rhetoric from Zanganeh continued, albeit with indications that the Iranians would ultimately not be able to stop what’s already in motion.
For his part, Al-Falih assured the market that a deal would “of course” be reached and later in the session, he contended that “the market clearly needs additional oil supply in the second half” before saying he’s “confident that at the end of the day reason will prevail”.
Well on Wednesday evening, FT is out reporting that Riyadh is looking for a cumulative increase of between 600k and 800k bbl/day. To wit:
Saudi Arabia is targeting a collective production increase of 600,000 to 800,000 barrels a day at the meeting of Opec and Russia later this week, according to a senior Opec source familiar with the kingdom.
The target, which it proposes would be shared proportionally between all members of the so-called Opec+ group that are capable of raising output, has not yet been finalised but is forming the basis of discussions with other countries. Saudi Arabia’s energy minister Khalid al Falih said on Wednesday that it was time for the group to “change course and respond to the market” but stopped short of saying how large he thought any production increase should be.
So we’ll see how that goes over with the market. Generally speaking that’s somewhere between the whisper numbers that prompted crude to spike on Monday and the higher-end estimates that were making the rounds prior to this week.
I guess that’s what a “compromise” is all about.
As a reminder, this hasn’t historically been particularly effective when it comes to engineering short-term price declines.
