Opec reaches a last-minute compromise to boost oil production

The talks in the Austrian capital were the latest steps in a process that has whipsawed oil markets for weeks as consumers from the US to India and China expressed anxiety over rising prices as Saudi Arabia and Russia sought a deal that would please all sides.

Opec will meet again on Saturday with non-members, including Russia, to ratify Friday’s agreement.

Brent gains

Brent crude gained in London as the Opec agreement was announced.

Futures gained as much as 3%, reversing a slump on Thursday when it appeared that Iran might walk away from a deal, encouraging rival producers including Saudi Arabia to go it alone. Brent crude prices set a new intra-day high after the news.

“It’s a relatively modest increase, but I think it’s also important that it’s a change from the previous strategy,” PetroMatrix MD Olivier Jakob said by phone. “The initial increase is not necessarily the last increase, it does open the door to a continued increase.”

Further details of the agreement on Friday weren’t immediately clear, though the deal would mean a return to 100% compliance with production quotas, according to a delegate at the Vienna meeting.

Brent crude for August settlement rose as much as $2.19, or 3%, to $75.24 a barrel on the London-based ICE Futures Europe exchange and traded at $75.06 at 8.43am New York time. Prices slid 2.3% on Thursday.

West Texas Intermediate (WTI) crude for August delivery rose as much as 2.64% to $67.27 a barrel on the New York Mercantile Exchange. The US benchmark oil traded at a discount of $7.87 to Brent.

Before the ministers’ meeting, comments from Saudi Arabia, Iran, Iraq and others suggested that they were inching toward a compromise. Saudi Arabia has sought to boost production, with Al-Falih saying on Thursday that his nation was siding with consumers.

“The risk to the price of oil from failure probably helped bring the deal home,” said Ole Hansen, head of commodity strategy at Saxo Bank. “We should still remember that the production deal is still alive and kicking. They’re basically pre-empting a shortfall to keep the price stable.”

With assistance from Nayla Razzouk, Elena Mazneva, Francois de Beaupuy, Salma El Wardany, Golnar Motevalli, Javier Blas, Sharon Cho and Heesu Lee

Bloomberg