Published: Thu, June 21, 2018
Business | By Kate Woods

Oil prices have become unsustainably high: Dharmendra Pradhan

Oil prices have become unsustainably high: Dharmendra Pradhan

At the Friday meeting, Saudi Arabia and Russian Federation would push for increased supplies but may face opposition from Iran and its allies, according to media reports.

The week ahead still sees a major and tense OPEC meeting on the table.

Russian Federation has proposed Opec and non-Opec raise output by 1.5 million barrels per day (bpd), effectively wiping out existing production cuts of 1.8 million bpd that have helped rebalance the market in the past 18 months and lifted oil to $75 per barrel. Opposition within OPEC does not want to raise production limits for fear of another decline in oil prices hampering government coffers, while Saudi Arabia and Russian Federation are looking to stabilize oil prices after a run up the charts that saw crude hit multi-year highs recently. There are different views on how much to increase production and whether such a move should be gradual, one source said following a meeting of Gulf oil ministers on Tuesday evening. Oil was trading as low as $27 in 2016.

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OPEC will discuss possible changes to the supply-cut deal in the Austrian capital later this week.

Saudi Arabia's Energy Minister Khalid Al-Falih was confident that there would be an agreement at OPEC on Friday, saying today that "Of course we will have an agreement". But Iran's OPEC Governor Hossein Kazempour Ardebili said that Iran would only (possibly) agree to each individual country returning to 100 percent compliance, not compensating for declines in another OPEC member by boosting their production. "Stay tuned." A decision to increase output could be taken with Iran refusing to sign up, as has happened before in Opec.

"We expect OPEC and Russian Federation to gradually add supplies back to the market by next year, mostly offsetting the nearly 1 million barrels per day (bpd) supply disruption in Venezuela", Barclays bank said.

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While India is not in favour of oil prices as low as $30 a barrel, the prevailing price levels are too high and stand to hurt the country's fiscal situation, Petroleum Minister Dharmendra Pradhan said on Wednesday. Iran is usually not part of the committee, which includes Russia, Saudi Arabia, the UAE, Oman, Kuwait, Algeria and Venezuela.

But a member of Nigerian delegation to the event said as a loyal member, Nigeria will support the position of OPEC leadership to retain the current supply level in order stabilise the market.

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