OPEC rift deepens ahead of crucial meeting

Saudi Arabia, backed by non-OPEC member Russia, is racing to convince the cartel to raise production. (AFP/Amer HILABI)

"I do not think we can reach an agreement," Bijan Namdar Zanganeh told reporters at his Vienna hotel after quitting talks with a group of ministers on the eve of a crucial OPEC meet.

The talks, which continued without Zanganeh, sought to lay the groundwork for Friday's gathering of the 14-nation Organisation of Petroleum Exporting Countries (OPEC), when the cartel will discuss easing a supply-cut deal with 10 partner countries that has pushed crude prices to multi-year highs.

The output curbs have been in place since January 2017 but Saudi Arabia, backed by non-member Russia, is now pushing to raise production again in order to meet growing demand in the second half of 2018.

But they have run into resistance from Iran, Iraq and Venezuela, who would struggle to immediately raise output and fear losing market share and revenues if other countries open the spigots.

Iran is particularly vocal about its objections as it braces for the impact of fresh US sanctions on its oil exports after President Donald Trump quit the international nuclear agreement.

However Riyadh, which cheered Washington's exit from the nuclear pact, is under pressure from Trump to boost output in order to lower oil prices ahead of November's midterm elections.

'ONE MILLION BARRELS PER DAY'

Saudi Energy Minister Khalid al-Falih had earlier signalled understanding for Iran's position, acknowledging that a big production hike might be "politically unacceptable" to some OPEC countries.

Speaking after Thursday's meeting, Falih said Saudi Arabia and Russia would recommend raising output by one million barrels a day in Friday's OPEC gathering and Saturday's meeting of non-OPEC allies.

"We think this will go a long way in keeping the market from tightening," Falih told reporters.

The 24 nations in the supply-cat pact, known as OPEC+, agreed in late 2016 to trim production by 1.8 million barrels a day but they have actually been keeping some 2.8 million barrels per day off the market.

Much of the shortfall has come from Venezuela, where an economic crisis has savaged the nation's petroleum production.

Output has also plummeted in Libya, where fighting between rival factions has damaged key oil infrastructure.

Given the production restraints in some countries, the one million barrels per day proposal would in reality end up adding several hundred thousand barrels to the market.

Despite the apparent compromise suggestion, it remains far from certain a deal can be struck.

OPEC operates on the principle of consensus, and Iran has already signalled it could veto attempts by other cartel members to offset its expected production losses as a result of the upcoming US sanctions.