OPEC agreed on a “nominal” production increase of 1 million barrels a day, Saudi Energy Minister Khalid al-Falih told reporters in Vienna. In reality, the accord will add about 700,000 barrels a day of oil to the market in the second half of the year because several members are unable to increase their output, said Nigeria’s Oil Minister Emmanuel Ibe Kachikwu, Bloomberg reported.
The final communique from the group’s meeting in Vienna left some unanswered questions about how the oil will flow to consumers. The document didn’t mention the specific production hike cited by Falih, instead pledging that the group would focus on restoring its output cuts to the level originally agreed in 2016.
OPEC and its allies exceeded their pledged 1.8 million barrel-a-day production cut by 47 percent last month, according to Russian Energy Minister Alexander Novak. That’s about 850,000 barrels a day of additional supply losses that have been largely unintentional, reflecting the collapse in Venezuela’s oil industry and long-term declines in Mexican output.
Crude actually rallied following the OPEC deal, with US benchmark West Texas Intermediate jumping as much as 3.7 percent to $67.93 a barrel.
The vague language may help to preserve the hard-won unity of the group of 24 oil producers, whose cooperation ended a three-year price slump. It salvages an agreement that was very much in doubt on Thursday evening after Iranian Oil Minister Bijan Namdar Zanganeh walked out of a meeting with fellow ministers, predicting nobody could persuade him to back an increase.
After all the internal OPEC wrangling, which for weeks has whipsawed oil markets, the group’s president said Friday’s deal was all about the needs of oil users.
"This agreement that we reached is a testimony that we care about the consuming countries,” United Arab Emirates Energy Minister Suhail Al Mazrouei, who is also OPEC president, told reporters. “We listen when they say that they have a concern."
OPEC will meet again on Saturday with non-members, including Russia, to ratify Friday’s agreement.