Oil price slips as OPEC reportedly weighs increasing output

Saudi
Arabia’s Oil Minister Khalid al-Falih (R) sits next to Russian
Energy Minister Alexander Novak as he addresses a news conference
after an OPEC meeting in Vienna, Austria.
Reuters/Heinz-Peter Bader

Oil prices fell Friday amid reports OPEC is
considering boosting coordinated output levels ahead of US
sanctions against Tehran, which will effectively cut off Iranian
production for much of the world.

West Texas Intermediate crude oil fell below $70 a
barrel and Brent shed
more than 1% after
Reuters
reported OPEC and other supply-cutting countries led by
Russia are discussing raising production by 500,000 barrels per
day at a Sunday meeting in Algeria.

Following President Donald Trump’s decision in May to withdraw
the US from the Iran nuclear deal, the State Department earlier
this year called on buyers to stop importing barrels from the
Islamic Republic by November. 

The oil sanctions could make maintaining global supply
“very challenging,” the International Energy Agency warned last
month. Iran is the third-largest producer within
OPEC. 

The Trump administration has looked to Middle Eastern producers
to pick up the slack left by its policy, with Saudi Arabia
agreeing earlier this year to increase its oil output by a
“measurable” amount. OPEC has already boosted production
once this year, agreeing in June to reduce compliance with
coordinated supply constraints.

Still, Trump has continued to take aim at OPEC for energy
costs, demanding Thursday that the cartel “get prices down
now!”

“We protect the countries of the Middle East, they would
not be safe for very long without us, and yet they continue to
push for higher and higher oil prices!” he
tweeted.

Analysts remain skeptical OPEC and Russia will be able to
offset the expected supply squeeze. Stewart Glickman,
an energy equity analyst at CFRA Research, still sees the
potential for upward pressure on crude oil prices in the
near-term.

“We think Saudi Arabia, which has the lion’s share of
global spare capacity, will be hesitant to boost production
meaningfully higher despite falling Iranian exports,” Glickman
said. 

It remains unclear if the US will grant sanction waivers to
countries in attempt to avoid supply shocks. Trump administration
officials have said they might look at requests on a case-by-case
basis, while also maintaining that the goal is to cut Iran’s
exports to zero. 

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