Oil prices rose nearly 3 percent on Friday as OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.
As tensions mounted, the Iranian and Saudi ministers huddled for bilateral talks on Friday morning, holding up the start of the closely watched OPEC meeting. Questions over the future of OPEC production, in light of OECD crude oil stockpiles falling below the Cartel's targeted five-year averages, now lingers over the market.
As a result, oil supplies fell deeper than expected, and oil prices rose more than expected.
Friday's decision means OPEC will observe the production level it agreed on in late 2016, when it cut output by 1.2 million barrels a day.
The announcement follows an agreement between OPEC and non-members led by Russian Federation to increase crude oil output by a million barrels per day.
Downside oil price actions may further be influenced by growing US production and the world's economic picture turning sour over the "Make America Great Again US Vs. EU, China and the rest of the World" looming trade war.
How that translates into effective production increases is uncertain, as some OPEC countries can not easily ramp up production.
Iran, OPEC's third-largest producer, had demanded OPEC reject calls from Trump for an increase in oil supply, arguing that he had contributed to a recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.
The Organization of the Petroleum Exporting Countries agreed in principle on Friday to raise output enough to match a production target it introduced at the beginning of 2017, but which it has undershot ever since.
Up to April 2018, while oil prices increased by almost 25% compared to the same period a year ago, investment in oil industry has not picked up in a commensurate manner. With pressure likely to be exerted on buyers of Iranian crude in Europe and elsewhere in Asia, Iran's output could easily drop by a million barrels a day by the end of the year.
OPECagreed to increase output by 1mln bpd to reduce "over compliance" with the current output agreement.
Importantly, the 100 per cent compliance target is for the group as a whole, not for individual members. Over the past few months, the plan has been overfulfilled, including through declining production in Venezuela and a number of African countries. "As individual countries, it is challenging", said United Arab Emirates Energy Minister Suhail bin Mohammed al-Mazroui.
Iran has objected to having members with additional capacity such as Saudi Arabia fill Venezuelan output gaps.
Saudi Arabia and Iran stood side by side, and proved that politics can take a back seat when it comes to serving the best interests of OPEC members.
Liberty Oilfield Services Chairman Chris Wright on how OPEC ministers agreed to raise oil production. "OPEC is set to hold the next biannual meeting on 3 December", wrote analysts at Danske Bank.
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