Russian Federation backs OPEC oil output hike

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How intent is the Organization of Petroleum Exporting Countries to stick to output curbs put in place 18 months ago?

Already, OPEC members' adherence to the group's late-2016 total production cut quota of 1.2 million bpd continues to come in higher than the standard 100 percent expected compliance levels.

Al-Falih also said leaders from other countries including India, China and South Korea had also expressed concerns to him that their economies were "starting to feel the pinch of higher oil prices".

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.

Earlier this week, Indian Petroleum Minister Dharmendra Pradhan urged the OPEC to move to responsible pricing of oil and gas, saying the current prices are posing a threat to fragile world economic growth.

Organization of the Petroleum Exporting Countries (OPEC) agreed with Russian Federation and other oil-producing allies on Saturday to raise output from July, with Saudi Arabia pledging a "measurable" supply boost but giving no specific numbers.

"It is very clear that Saudi Arabia, anxious about prices running higher going forward, is trying to put in place a near-term cap on prices", said Yasser Elguindi of Energy Aspects Ltd., a consultant.

Trump has been calling publicly for the cartel to help lower prices by producing more.

Iran was also understood to have demanded the final OPEC statement to include a formal OPEC condemnation of U.S. sanctions being imposed on OPEC member countries, which Tehran clearly did not get.

August WTI Crude Oil settled at $68.58, up $3.73 or +5.75% and September Brent Crude Oil finished the week at $75.32, up $2.24 or +3.07%.

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Iran has objected to having members with additional capacity such as Saudi Arabia fill Venezuelan output gaps.

US President Donald Trump, whose tweets played a part in prompting Saudi Arabia to push for a production increase, on Friday said that he would be watching the progress of their new agreement closely.

Importantly, "it gives Saudi Arabia the flexibility to respond to disruptions at a time when US sanctions on Iran and Venezuela threaten to throw the oil market into turmoil". "OPEC as a predominant supplier has the responsibility to maintain supply equilibrium", Pradhan said.

Top global exporter Saudi Arabia will increase output by hundreds of thousands of barrels, he said, with exact figures to be decided later.

Global marker, Brent, traded above US$100 a barrel for several years until 2014, dropping to nearly US$26 in 2016 and then recovering to over US$80 last month.

"We are not going to allow a shortage to materialize to the point where markets will be squeezed and consumers will be hurt", he said.

Oil prices reacted favourably to Opec's compromise deal, with futures in the United States gaining as much as 4.9% as ministers left their meeting in Vienna.

Additionally, in a sign of strong demand, US refineries processed a seasonal record of 17.7 million barrels per day (bpd) of crude oil last week, according to the EIA.

"Each country which has produced less (than its allocation) can produce more".

"Certainly the longer it drags out, the market is bound to see some pressure, at least in some sectors and with certain companies", said Ghriskey.