OPEC oil market discussions overshadowed by concerns over US-Iran tensions

OPEC representatives will meet in Vienna today to discuss the state of global oil markets. It comes as the price

KSA Oil minister

Photo: Reuters

OPEC representatives will meet in Vienna today to discuss the state of global oil markets. It comes as the price of oil has risen due to increased tensions between Iran and the US.

Oil traded at roughly $60 a barrel last week, down approximately 12% from April highs. This is likely to reinforce the argument by some OPEC members that further production cuts are necessary to boost prices in the long-term. However, oil prices have steadily risen to $66 a barrel over the past week as the US imposed additional economic sanctions on Iran and came close to a military clash.

These developments have not altered the issue of oversupply—an issue unlikely to be affected by the heightened tensions. As a result, the cartel is expected to roll over its current production limit of 1.2 million barrels per day. While OPEC is likely to recognise that a conflict between the US and Iran could slow or halt oil transportation in strategic waterways such as the Strait of Hormuz, rising shale production in the US and pressure on OPEC’s market share is expected to override geopolitical concerns in the short-term.

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