OPEC's Increased Output Helps U.S. Shale Companies

OPEC strikes deal to boost oil production | TheHill

OPEC strikes deal to boost oil production | TheHill

Oil prices rose sharply after OPEC agreed to only a modest increase in output to compensate for losses in production at a time of rising global demand.

And after OPEC's deal on Friday, Trump tweeted: "Hope OPEC will increase output substantially".

USA crude rose 4.76 per cent to $68.66 per barrel and Brent was last at $75.50, up 3.35 per cent on the day. But in reality, Nigeria's Oil Minister Emmanuel Ibe Kachikwu felt, the accord will add about 700,000 bpd of oil to the market in the second half of the year as several members are unable to increase their output. Trump wrote on Twitter after OPEC announced its decision.

As a result, oil supplies fell deeper than expected, and oil prices rose more than expected.

OPEC and non-OPEC said in their statement that they would raise supply by returning to 100 percent compliance with previously agreed output cuts, after months of underproduction.

Saudi Arabia promised to act decisively to keep oil prices under control, signalling a real supply boost approaching 1 million barrels a day is on the way to global markets.

Russian Energy Minister Alexander Novak, who attended Thursday's technical meeting, said it was "very important" not to allow the oil market to "overheat". "We're taking our breath and focusing on the oil market", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, NC.

Ahead of Friday's meeting, OPEC's largest producer, Saudi Arabia, was seen to be open to higher production but Iran had been hesitant.

Trade worries still loomed, however, as U.S. President Donald Trump, in his latest move, threatened to impose a 20 percent tariff on all European Union auto imports. That means the country has little to gain from a deal to raise output, unlike Saudi Arabia.

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The countries of the Organization of the Petroleum Exporting Countries (OPEC) cartel agreed on Friday to pump 1 million barrels more crude oil per day, a move that should help contain the recent rise in global energy prices.

Opec's decision confused some in the market as the producers gave opaque targets for the increase, making it hard to understand precisely how much more it will pump. Those which can not, will not.

Because the cartel had been producing below that ceiling, that effectively means an increase in production.

But Falih said pro-rata quota reallocations did not have to be strict, meaning Saudi wanted to fill the gaps left by others. However, he indicated that some countries could pick up production if others lag.

State oil company Saudi Aramco had anticipated this week's decision and was already ramping up output, Al-Falih said. The next formal OPEC meeting was set for December 3.

"Each country can only pro-rata increase their production and the majority of them can't increase their production at all", Wright said during an interview on "Countdown to the Closing Bell".

"Zanganeh can go back to his country and say "I won", because we are keeping the original agreement unchanged".

As Trump's sanctions begin to bite in the coming months, Iran's production will also fall - and probably much more so than Venezuela's.