VIENNA: Opec edged closer on Thursday towards raising oil output, with Iran softening its opposition to an increase and Saudi Arabia warning of supply shortages and price rallies if production remained stable.

A production rise of about 1 million barrels per day (bpd) or around 1 per cent of global supply was emerging as a consensus for the group and its allies, Opec sources told Reuters, adding that Iran could agree under certain conditions.

The Organisation of the Petroleum Exporting Countries (Opec) meets on Friday to decide output policy amid calls from top consumers such as the United States, China and India to cool down oil prices and support the world economy by producing more crude.

Russia, which is not in Opec, has proposed producers raise output by 1.5m bpd. Saudi Energy Minister Khalid al-Falih said on Thursday the world needed at least an extra 1 million bpd to avoid a shortage in the second half of 2018.

Opec and its allies have since last year been participating in a deal to cut output by 1.8 million bpd. The measure has helped rebalance the market in the past 18 months and lifted oil to around $74 per barrel from as low as $27 in 2016.

But unexpected outages in Venezuela, Libya and Angola have effectively brought supply cuts to around 2.8m bpd in recent months. Iran’s output is also likely to fall in the second half of this year due to new U.S. sanctions.

Iran, Opec’s third-largest producer, has so far been the main barrier to a new deal as it said on Tuesday Opec was unlikely to reach an agreement and should reject pressure from U.S. President Donald Trump to pump more oil.

But on Wednesday, Iranian Oil Minister Bijan Zanganeh said Opec members that had overdelivered on cuts in recent months should comply with agreed quotas.

That would effectively mean a boost from producers such as Saudi Arabia that have voluntarily cut more deeply than planned.

“An increase is acceptable if justified from the demand side and if it is agreed by all Opec members. An increase because of external pressure on Opec is not acceptable,” said a source familiar with Iranian thinking.

Published in Dawn, June 22nd, 2018