What to Expect From the OPEC Meeting

Reuters reported that the reinstitution of us sanctions in November could cut Iran's oil output of almost 4 million barrels a day by a third. Iran has objected to having members with additional capacity such as Saudi Arabia fill Venezuelan output gaps.

Regional rival Iran however is fiercely opposed to unwinding the agreed production curbs, as its oil industry is bracing for fresh sanctions following US President Donald Trump's decision to quit the worldwide nuclear pact.

"I'm confident that at the end of the day reason will prevail", Saudi Energy Minister Khalid Al-Falih told reporters in Vienna after a succession of meetings.

Saudi Arabia is reportedly looking to increase production by 1 million barrels per day, while Russian Federation has said it would like to see an extra 1.5 million barrels per day to the market before reassessing the next move.

So, the kingdom may want to compromise and go for a smaller oil production increase, the option that apparently Iran favors, to get an unanimous communique.

Also supporting prices was a drop in Libyan supplies due to the collapse of an estimated 400,000-barrel storage tank.

Iran is understood to want a coded critique of the U.S., which recently ended an worldwide nuclear agreement with Iran, in the final Opec agreement on Friday. In turn, USDCAD rose to a fresh 1 year high as markets reduced rate hike bets from the Bank of Canada with OIS markets now pricing in a 53% chance of a hike in July from 60%.

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If this threat turns into reality, U.S. crude oil-which is now in high demand in Asia due to the wide $9-a-barrel discount to the Brent Crude worldwide benchmark-will become uncompetitive.

Any production increase would help offset a decline in output by Venezuela, an OPEC member consumed by economic and political crisis, and the prospect of reduced exports from Iran - OPEC's third-biggest producer - now that the U.S.is in the process of re-imposing sanctions over that country's nuclear program.

"If China's import demand dries up, more than 300,000 bpd of United States crude will have to find a new destination", energy consultancy FGE said. In reaction to the announcement, Brent crude futures are trading higher by over $2, given that the increase can easily be absorbed by the market and will unlikely tip the oil balance into negative territory. The new deal would effectively roll back the deeper-than-intended cuts from nations such as Venezuela, returning the curbs back to the level originally agreed in 2016, the delegate said.

The 24 nations in the pact, known as OPEC+, are now keeping more than two million bpd off the market.

Iran's oil minister, Bijan Namdar Zanganeh, questioned this week whether OPEC is united enough to reach any agreement, and said Trump had politicized the debate over oil prices.

"This puts Saudi Arabia in a tough position, as unanimity is needed for any accord to be reached", it added.

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