Iran: The world’s major oil-producing countries are under pressure from the US, China and Russia to pump more crude and bring down oil prices.
But Opec’s crunch meeting in Vienna on Friday finds the oil cartel divided after nearly two years of unity over production curbs, which were due to run until the year’s end.
Saudi Arabia and Russia are leading the push to boost supplies; Iran, Iraq and Venezuela are opposed to a significant increase. Saudi oil minister Khalid al-Falih said on Thursday that increasing production by 1m barrels a day “sounds like a good target to work with”.
Here are five charts that explain why Vienna will be fractious and, as RBC Global Asset Management said, “a tricky one to predict”.
Since Opec and Russia agreed in late 2016 to curb production in a bid to rebalance world supply and demand, crude prices have jumped 55%.
Brent crude, the international benchmark, recently hit highs of $80 (£60) a barrel, raising inflation fears and concerns it could act as a brake on world economies. Prices have since fallen back slightly, to around $74, on market expectation that the Opec meeting will agree a rise in crude production.
Higher oil prices spurred a jump in output from US shale fields, but not enough to offset the output reductions by Opec and its allies.
The so-called “Vienna group” of the cartel’s 14 members and Russia could consider its goal of rebalancing oil markets as “mission accomplished”, the International Energy Agency said in the spring. That success opened the door for the producers to start thinking about an exit strategy from the cuts.
Until recently, many observers thought this week’s meeting would likely just mark an easing of the cuts, not a reverse ferret.
The US changed that calculus in May by promising to reimpose sanctions on Iran and threatening sanctions on European companies that did business there. The country supplies 4% of the world’s oil, so its expected drop in exports will cause a shortfall. Supply has already been dented by production freefall in crisis-hit Venezuela.
Saudi Arabia and Russia have the capacity to pump more oil; Iran, Iraq, Algeria and Venezuela do not, and have nothing to gain from higher production and lower prices.
While Opec can take some of the credit for pushing up prices, supply is not the only factor. Strong economic growth globally has driven surprisingly high demand for crude, and shows no sign of stopping.
The International Energy Agency is forecasting demand to hit 100m barrels per day next year. That appetite should stop prices crashing to the lows of 2014-16, as the Saudis and Russians change course on output cuts.
It remains to be seen whether they get Iran and others onboard for a formal Opec agreement, or go ahead with increases regardless. Russia has said that if the Vienna group agrees to raise output, members could meet again in September for a review.