The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and non-OPEC producers including Russian Federation agreed over the last few days on a modest increase in oil production from July, following calls from major consumers to curb rising fuel costs.
On Friday, OPEC agreed to raise output from July by about 1 million barrels per day (bpd), after Saudi Arabia persuaded its rival Iran to cooperate.
But it said: "We are increasing our estimate of oil likely to come off the market by November to about 700,000 bpd - another bullish factor for prices". But at the moment, the Congolese government is more concerned - and rightly so - about enjoying an equilibrium in global oil markets and attracting higher investments into the sector.
The decision by OPEC and non-OPEC countries, participating in the oil output cut deal is a compromise between some countries which wanted to increase production, Francis Perrin, Senior Fellow at the OCP Policy Center (Rabat, Morocco) and Senior Research Fellow at the French Institute for global and Strategic Affairs (IRIS, France), told Trend.
With band-aid solutions in place, the road to $140 could be on again even as global oil markets continue to rebalance nicely, with the latest International Energy Agency (IEA) oil market report showing OECD oil storage officially below the five-year average by 1 million barrels.
US crude stocks fell almost 10 million barrels last week, the most since September 2016, while gasoline and distillate inventories rose less than expected, the Energy Information Administration said.
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Several consumer states have demanded that OPEC act to prevent further price increases. President Donald Trump has repeatedly criticized OPEC for limiting oil production. News that the U.S.is pushing for countries to cut Iran oil imports to zero by November, uncertainty surrounding Libya output and doubts over OPEC's ability to lift output quickly enough to avoid a shortfall all contributed to oil's gain.
The US president tweeted within an hour of OPEC announcing its deal: "Hope OPEC will increase output substantially". "Obviously, we have a market that is stressed from the standpoint of supply".
Crude stocks at the Cushing, Oklahoma, delivery hub for the NYMEX futures contract fell 2.7 million barrels, EIA said. There is not much oil in the market'. As numerous OPEC members do not have the resources or capability to increase oil production, Russian Federation and Saudi Arabia will mainly benefit from the increase.
The Saudi state oil company is putting part of the extra production on storage, according to the same people. USA production alone is not enough to keep up with rising demand (1.65 million b/d per year), and prices are consequently rising.
"We're going to isolate streams of Iranian funding and looking to highlight the totality of Iran's malign behavior across the region", the official, speaking on condition of anonymity, told reporters.