The OPEC Agreement Puts A Floor Under Oil Prices

An oil pumpjack operates in the drive-thru area of a McDonald's in Bradford Pennsylvania

Given the production restraints in some countries, the one million barrels per day proposal would in reality end up adding several hundred thousand barrels to the market. Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.

By avoiding setting individual country targets, the deal appears to give Saudi Arabia the leeway to produce more than its official OPEC target and fill the gap left by those like Venezuela who can not pump enough to meet their official allocation.

Al Jazeera's Paul Brennan explains why.

The 24 nations in the supply-cut pact, known as Opec+, agreed in late 2016 to trim production by 1.8 million barrels a day but they have actually been keeping some 2.8 million barrels per day off the market.

The announcement was made on Saturday during the 4th OPEC and non-OPEC ministerial meeting in Vienna.

Two OPEC sources said the group agreed that OPEC and its allies led by Russian Federation should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply.

The actual output increases set a bullish tone, as they came in below some of the highest figures that had been discussed prior to the meeting. Russia, a non-member, is the second largest oil producer after Saudi. The minister said the difference between that amounts to "a little bit less than 1 million barrels".

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State oil company Saudi Aramco had anticipated this week's decision and was already ramping up output, Al-Falih said. He was repeatedly asked whether countries with spare production capacity - mainly Saudi Arabia - would be able to make up the volumes that others can't produce.

Crude oil prices are rising sharply, extending weekly gains.

The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who anxious that high oil and gasoline prices would be politically painful ahead of midterm elections later this year.

OPEC and its allies have since previous year been participating in a pact to cut output by 1.8 million bpd.

"I agreed to have 100 percent of compliance, not more", Iran's Zanganeh said as he left OPEC headquarters on Friday. The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016.

Support for the increase, which had been proposed by Saudi Arabia against objections from Iran, was unanimous, he said. This not only adversely impacts one of OPEC's largest member's upstream activities, further weighing output levels lower by 600,000 bpd, but also lead to the retraction of production volumes half amounting to nearly half of OPEC's agreed total reduction of 1.2 mbpd. Crude oil price in India surged from $50.57 bbl in May previous year to $75.31 bbl this May.

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