Crude oil prices extended gains Friday as OPEC leaders entered their crucial policy meeting in Vienna that should lead to a formal decision which would add as much a 1 million barrels a day in new supply to the global market.
Any agreement on production targets from the Organization of the Petroleum Exporting Countries, however, will need to include a compromise from Iran, which has been hit by recent U.S. sanctions and is said to be supporting no change in the current agreement which is taking 1.8 million barrels of oil from the market each day. Saudi Arabia, which, along with non-OPEC member Russia, are the world's two biggest producers and are said to be supporting a 1 million barrel per day increase, a figure that would equate to about 1% of total global supply.
"We are cooking something," is all Iranian Oil Minister Bijan Zanganeh would tell reporters in OPEC's Vienna headquarters when asked if a deal with the Saudis was on the table.
Brent crude contracts for August delivery, the global pricing benchmark, were seen 96 cents higher from their Thursday close in New York and changing hands at $74.01 per barrel while WTI contracts for July were marked 72 cents higher at $66.26 per barrel.
Saudi Arabia's powerful Energy Minister, Khalid Al-Falih, said yesterday that global consumers were demanding more crude supply and that he was confident a deal could be struck that would satisfy all stakeholders and declared global markets "re-balanced" even as he conceded that the cartel's mission wasn't yet accomplished.
"The reality of the matter is the increase will be gradual," Falih said Friday. "Not all countries are able to produce and not all customers are able to receive the additional crude crude. so it is naturally going to be phased over time."
Iran, Venezuela and Iraq have reportedly resisted calls for a change in OPEC's December 2016 agreement, which, along with Russia, has taken 1.8 million barrels of crude from the market each day and is set to continue to do so until the end of this year.
The output cap, as well as unprecedented co-operation from member states, pushed global crude prices to a near four-year high of $80 a barrel last month and lifted U.S. gasoline prices closer to $3 a gallon in the days prior to the Memorial Day holiday in May.
A further sticking point beyond the hard numbers of supply, however, are linked to reports that Iran wish to include a reference to the U.S. sanctions, spearheaded by U.S. President Donald Trump in the face of overtures from both German Chancellor Angela Merkel and French President Emmanuel Macron, in OPEC's final communique, something both Saudi Arabia and the broader carter would like to avoid.
"This is not a political organization, this is a commercial organization," OPEC president and UAE Energy Minister Suhail Al Mazrouei said Thursday. "We are not going to politicize the discussion, we will make good project like we do always. I'm confident that this group will always do the right thing."