Saudi Arabia: Deal can be done this week to boost oil supply

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Yergin said Saudi Arabia and the United Arab Emirates support the current, tougher us policy toward Iran, Saudi Arabia's rival for influence in the region, and so will want to support Trump's call for higher production and lower prices.

A production increase would help undo a 1.2 million barrel cut agreed on in late 2016 that has since helped push up the price of oil by nearly 50 per cent. Non-OPEC member Russian Federation had also agreed to that cut and will discuss with OPEC on Saturday whatever production increase the cartel agrees on Friday.

"In the long term, this will have a negative effect on the global economy even if, in the short term, it might be positive for other non-US producers", Rainer Seele, chief executive at Austria's oil company OMV, said in Vienna where OPEC officials and ministers and top oil industry executives attended a seminar this week.

Various analysts have been wondering whether the Saudis will manage to pull off the listing of 5 percent of Aramco this year, amid speculation as to which foreign stock market the Saudis will choose, if any, and if the price of oil would be high enough to support a high valuation for the company.

The new deal would effectively roll back the deeper-than-intended cuts from nations such as Venezuela, returning the curbs back to the level originally agreed in 2016, the delegate said. Ministers at the event have also indicated that Iran, which was expected to oppose an increase might now agree to a production hike.

After almost two years of relative unity, the talks in Vienna this week have found Opec divided.

The Organisation of the Petroleum Exporting Countries meets on Friday to decide output policy amid calls from major consumers such as the U.S. and China to cool down oil prices.

Meanwhile, the oil industry will watch how USA shale firms respond to the OPEC decision Friday.

OPEC takes its decisions by unanimity, so if Iran were to wield its veto Saudi Arabia would be left only with the option of assembling a coalition of willing countries to bypass Tehran's opposition.

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Last week, Cushing inventories fell by 1.3 million barrels, government data showed on Wednesday.

"The effective increase in output can easily be absorbed by the market", Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas told Reuters Global Oil Forum.

Brent is up 61% over the year.

Falling production in Venezuela and Libya, as well as the risk of lower output from Iran as a result of United States sanctions, have all increased market worries of a supply shortage.

He warned his fellow oil producers about rising consumer anxiety and the potential for high prices to have a negative impact on demand.

"If China's import demand dries up, more than 300,000 bpd of U.S. crude will have to find a new destination", energy consultancy FGE said, adding that "this will certainly depress U.S. Gulf Coast prices".

Chinese buyers are already starting to scale back orders, with a drop in supplies expected from September.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $66.49 a barrel, up 95 cents, or 1.5 percent. That was the biggest premium since August 2014.

USA drillers cut the number of rigs drilling for oil by one to 862, the first cut in 12 weeks, according to a weekly report from GE's Baker Hughes division.

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