Saudi Arabia Inching Towards Pro-Nigeria Compromise Ahead Of OPEC Meeting

Global benchmark Brent crude fell more than 2 per cent on Thursday ahead of a meeting of the Organization of the Petroleum Exporting Countries, where producers were expected to boost output to stabilize prices.

If the existing deal is retained and Saudi Arabia felt there was a need to add more oil, Riyadh could still increase production unilaterally, as it did after a meeting in June 2011 ended with no decision.

"I do not think we can reach an agreement", Bijan Namdar Zanganeh told reporters at his Vienna hotel after storming out of talks with a group of ministers on the eve of a crucial OPEC meet.

Opec in theory needs the agreement of all members to clinch a deal but has in the past agreed production pacts without Iran, which has criticised the idea of raising supply as it faces United States sanctions.

Ecuador said OPEC and its allies could agree to a compromise increase in output of around 0.5-0.6 million bpd.

The only route to a production boost that Iran has publicly suggested - allowing the handful of countries that have voluntarily cut deeper than necessary to restore some output - would deliver far less extra oil to the market than the Saudi proposal. 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.

In an historic agreement in late 2016 the OPEC+ group of 24 nations made a decision to cut 1.8 million barrels of production to revive the oil market from its biggest slump in a generation.

Brent oil prices were up 1.8% on Friday.

While Saudi Arabia's cutting by more than required has helped Opec's compliance, involuntary reductions in Venezuela amid economic crisis and in Angola due to natural decline have had a larger impact and can not be reversed at short notice. "OPEC is not part of the Department of Energy of the United States".

After almost two years of relative unity, the talks in Vienna this week have found Opec divided.

"Consumers are asking for more supply in the second half", said Saudi Arabia's Al-Falih.

Riyadh has said it is ready "to mitigate the effects of any supply shortages" from U.S. sanctions on Iran's oil.

Analysts expect the group will consider an increase of somewhere around 1 million barrels a day.

Earlier this week, Zanganeh left the door open for a deal, saying Opec members that had overdelivered on cuts in recent months should comply with agreed quotas.

Zangeneh also said on Friday OPEC would change the structure of the current deal, but did not elaborate. He said Opec could meet again in September to adjust the deal. He warned his fellow oil producers about rising consumer anxiety and the potential for high prices to have a negative impact on demand.

Gulf producers usually aligned with Saudi Arabia - the UAE, Kuwait, Oman and Bahrain - have also cautioned against a large output increase and signalled they have been rattled by Riyadh's close coordination with Russian Federation, sources have said.

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