Chika Amanze-NwachukuÂ Â with agency report
Oil price rose sharply yesterday after the Organisation of Petroleum Exporting Countries (OPEC) agreed a modest increase in oil production from next July.
This was sequel to recent calls from major consumers to pump more oil into the international market to help reduce the price of crude and avoid a supply shortage.
Brent crude oil futures rose $1.79, or 2.5 per cent, to $74.84 per barrel by 12:42 p.m. ET. U.S. West Texas Intermediate (WTI) crude futures were up $2.99, or 4.6 per cent, at $68.53 a barrel.
Although the 24- member organisation at its meeting in Vienna, Austria yesterday, approved a one million barrel boost to daily output, the actual increase will be smaller than that because some nations are incapable of pumping more crude, Bloomberg quoted Nigerian Minister of State for Petroleum, Dr. Ibe Kachikwu to have said.
OPEC resolved to increase oil production from next month after its leader Saudi Arabia persuaded arch-rival Iran to cooperate, following calls from major consumers to help reduce the price of crude and avoid a supply shortage.
Major oil consumers- â€“ the United States, China and India had urged Vienna-based OPEC to release more supply to prevent an oil deficit that would hurt the global economy, Reuters reported.
The organisation said in a statement that it would go back to 100 per cent compliance with previously agreed output cuts but gave no concrete figures.
Saudi Arabia said the move would translate into a nominal output rise of around 1 million barrels per day (bpd), or 1 per cent of global supply. Iraq said the real increase would be around 770,000 bpd because several countries that had suffered production declines would struggle to reach full quotas.
The deal, the Reuters reported, gave a tacit green light to Saudi Arabia to produce more than currently allowed by OPEC as the 14-nation organisation avoided setting individual country targets.
Iran, OPECâ€™s third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.
Â â€œHope OPEC will increase output substantially. Need to keep prices down!â€ Reuters quoted the U.S. President Donald Trump wrote on Twitter less than an hour after OPEC announced its decision.
Trump slapped fresh sanctions on Tehran in May and market watchers expect Iranâ€™s output to drop by a third by the end of 2018. That means the country has little to gain from a deal to raise OPEC output, unlike top oil exporter Saudi Arabia.
However, Saudi Energy Minister Khalid al-Falih convinced his Iranian peer Bijan Zanganeh to support the increase just hours before Fridayâ€™s OPEC meeting.
OPEC and its allies have since last year been participating in a pact to cut output by 1.8 million bpd. The measure had helped rebalance the market in the past 18 months and lifted oil to around $75 per barrel from as low as $27 in 2016.
But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8 million bpd in recent months.
The output boost agreed on Friday had been largely priced into the market and was seen as modest.
â€œIt will be enough for now but not enough for the fourth quarter to address a decline in Iranian and Venezuelan exports,â€ Reuters quoted Gary Ross, head of global oil analytics at S&P Global as saying.
He further added: â€œThere isnâ€™t a lot of spare capacity in the world. If we lose a million bpd of output from Venezuela and Iran in the fourth quarter, where will all these barrels come from? We are in for higher prices for longer.â€